Bets on HDFC futures climb to record

Bullish bets on Housing Development Finance Corp’s futures are at a record high, on optimism that the country’s largest mortgage lender would withstand a slowdown better than other financial companies. Open interest, or the number of contracts held by traders, yesterday totalled 24,093, the highest level since the futures started trading in 2002, and up from 3,543 on December 29.

HDFC may report tomorrow a 16 per cent increase in profit to Rs 1,030 crore ($198 million) for the December quarter, according to the median estimate of 12 analysts in a Bloomberg survey. Quarterly earnings have climbed an average 18 per cent during the past five years, missing analysts’ forecasts just four times.

“In the current weak environment, HDFC is the least vulnerable among finance companies and is expected to maintain its high-growth trajectory. Its shares are less volatile and bad-loan risk is less than its peers,” said Vaibhav Agrawal, V-P (research), Angel Broking.

Analysts forecast profits of Rs 960 crore to Rs 1,150 crore.

HDFC shares fell 0.5 per cent to Rs 680.95 at close, erasing an intra-day advance of 1.3 per cent to more than a five-month high. The stock has gained 4.4 per cent so far this year, after losing 10 per cent in 2011.

HDFC futures settled at Rs 682.60, at a 1.7 point premium to the underlying stock, compared with a 2.2 point discount on December 16. “That suggests traders are bullish on the shares,” said Nandish Patel, an analyst with brokerage Sharekhan in Mumbai.

“The increase in the share price, along with the gain in open interest and the widening of the spread between the stock and its futures shows accumulation of bullish bets,” he said.