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Covid-19 pandemic casts a cloud over HDFC Bank’s premium valuation

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HDFC Bank Ltd’s stock has gained roughly 23% since the 21-day nationwide lockdown was announced on 24 March to stem the spread of covid-19.

India’s most valuable private sector lender has outperformed the Nifty Bank index, which rose about 20% in the same period. This may well change in the wake of the lockdown getting extended by 19 days.

While analysts have not started putting up sell ratings [Sanford C Bernstein (India) Pvt. Ltd continues to be an outlier with an underperform tag on the stock], they have given enough warnings on the bank’s future performance.

To start with, the pain points flagged are its unsecured retail loans and loans to small and medium enterprises (SMEs). Indeed, the bank’s management said in a call with analysts

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