Street Signs: Analyst coverage of HDFC dips, defence stocks gain, and more

HDFC sees drop in analyst coverage

The number of analysts tracking Housing Development Finance Corporation (HDFC) has dropped to 35 (from 39), ahead of the merger announcement with HDFC Bank. On the other hand, the private bank has seen an increase in coverage from 48 to 51 analysts, according to Bloomberg data. Market players say some brokerages have shifted focus to the bank – a bigger entity in terms of market value — even before consummation of the merger that is still some time away. Under merger terms, every HDFC shareholder will get 42 shares of HDFC Bank for 25 shares held. At the current market rate and said merger ratio, HDFC shares are available at a 2.6 per cent discount to HDFC Bank.

Bumper week for defence stocks

Defence stocks, such as Bharat Electronics, Mazagon Dock Shipbuilders, and Cochin Shipyard, logged strong gains last week amid buying interest from wealthy investors. The rally comes on the back of news reports about a potential expansion of their order book. Recently, the government permitted defence forces to buy critical weapon systems for their operational requirements through an emergency procurement route. Mazagon Dock is also reportedly eyeing orders worth Rs 1.59 trillion from the Indian Navy. Moreover, investors hope defence manufacturers will benefit from simmering geopolitical tensions in India’s neighbourhood and beyond. Analysts believe there could be more steam left in the rally in defence stocks.

Selling after one-year lock-in continues

The trend of pre-initial public offering (IPO) investors selling after the end of the one-year lock-in is gaining traction. Last week, private equity firm Rivendell (formerly New Silk Route) offloaded its entire 12.54 per cent stake in Rolex Rings at Rs 1,700 per share to mop up Rs 581 crore. A similar trend is seen playing out in food delivery platform Zomato, where investors, such as Uber, Sequoia Capital, Tiger Global, and Moore Ventures, have divested holdings following the end of the one-year lock-in after IPO. Shares of Rolex Rings, which listed in August 2021, are currently trading 2x their IPO price.