HDFC shares down on infra bond impact worries

MUMBAI: Shares of HDFC were down on profit booking after the Reserve Bank of India eased lending norms for banks.

There are concerns that the RBI norms will have a negative impact on HDFC, which is a major player in lending housing loans.

As per the RBI circular, banks can raise long-term funds to lend to affordable housing and infrastructure.

As announced in the Budget, the bonds will not attract any statutory pre-emption such as cash reserve ratio ( CRR) or statutory liquidity ratio (SLR). Besides, they need not set aside additional funds for meeting priority sector requirements, which effectively translates into lower fund costs for banks.

Raising long-term resources is expected to help banks address their asset-liability mismatches.

UBS has downgraded HDFC to "Neutral" from "Buy" and also lowered its price target to Rs 1,075 from Rs 1,100 earlier.

According to the brokerage, aggressive pricing on loans by banks will have an adverse effect on HDFC. Competition to raise long-term bonds could also push up long-term rates.

At 10:10 a.m.; HDFC was at Rs 956.60, down 2.13 per cent, on the BSE. It touched a high of Rs 987.95 and a low of Rs 947 in trade today.