HDFC AMC bounces after brokerage initiates 'buy' call

HDFC Asset Management Company rose 1.65% to Rs 2,938.65 after a foreign brokerage initiated coverage on the stock with a 'Buy' rating and a price target of Rs 3,435.

The brokerage reportedly stated that the company is in a good position to capture positive changes in the Indian AMC industry. It is set to provide a high return on equity (RoE) business and investors may expect a dividend payout ratio of 80% during FY 2020-22. HDFC AMC was also able to weather out regulatory challenges successfully over a period, it added.

Shares of HDFC Asset Management Company tanked 15.99% in the past five trading sessions to settle at Rs 2,890.90 yesterday, 10 December 2019, from its close of Rs 3,441.45 on 3 December 2019.

HDFC AMC's promoter, Standard Life Investments, concluded its offer for sale (OFS) last week. It sold 3.10% stake via OFS. The floor price for the sale was set at Rs 3,170 per equity share.

Meanwhile, the S&P BSE Sensex was up 69 points or 0.17% to 40,309.30.

On the technical front, the stock's RSI (relative strength index) stood at 35.785. The RSI oscillates between zero and 100. Traditionally the RSI is considered overbought when above 70 and oversold when below 30.

The stock was currently trading below its 50-day moving average (DMA) placed at Rs 3,120.72, but still above its 200 DMA placed at Rs 2,198.78.

HDFC AMC's net profit soared 78.8% to Rs 368.24 crore on 6.6% increase in total income to Rs 549.07 crore in Q2 September 2019 over Q2 September 2018.

HDFC AMC is India's largest and most profitable mutual fund manager with Rs 3.7 trillion in assets under management. Started in 1999, it was set up as a joint venture between Housing Development Finance Corporation (HDFC) and Standard Life Investments.

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