Competition to cap HDFC stock price

Despite rate cuts, credit demand unlikely to improve meaningfully

After sector leader State Bank of India (SBI) cut lending rates over the weekend, most banks and housing finance companies (HFCs) have followed. Housing Development Finance Corporation (HDFC) also cut lending rates on Tuesday.

Rising competition in the segment has forced these cuts at a time when credit demand outlook continues to be bleak. These pressures could weigh on HDFC’s growth, margins and stock price movement in the near term, believe analysts.

Suresh Ganapathy, banking analyst at Macquarie Capital, says, “We believe HDFC will witness continued pressure on net interest income (NII) growth. Though lower rates could provide some uptick