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Why HDFC Group Stocks are Underperforming? What should the Investor do?

Why HDFC Group Stocks are Underperforming? What should the Investor do?

Published on 06 July 2021

What can be the reason behind the fall of HDFC Group stocks and what should the investors do in these kinds of situations?

Introduction:

Recently the stocks of HDFC Group are seen underperforming from its peers as well as from the market. The HDFC group stock is a consistent compounder in the long run but due to recent sluggishness, it is tagged as an underperforming stock. The market has seen sluggishness in the stocks such as HDFC Bank, HDFC Life, HDFC Ltd., etc.

Reasons for the underperformance:

  • When the pandemic hit in March 2020, the Institutional Investors look for companies with robust fundamentals only.
  • At that time the all the Stocks of HDFC Group we trading at a premium valuation. This made the stocks reach more premium values than before.
  • But now when the situation is getting better, the Institutional Investors are looking for companies that were severely hit to get more returns.
  • In the short term, those investors allocated the funds to other companies which led to underperformance in the stock.

What should investors do?

  • In the long-term, these stocks are proven as consistent compounders and their performance should not be judged in a short period.
  • There are two types of corrections in the stocks based on their valuations:
  1. The companies which are overvalued face price corrections that can be seen as a sharp fall in value over time.
  2. The companies with premium valuations experience time correction in which the stock will trade around the same price over some time.
  • This time correction is happening with the stocks of HDFC Group stocks currently.
  • If a person prefers long-term investing, then, this small sluggishness should not be taken as a major concern.

Conclusion:

These small-time corrections are very common in stocks with premium valuations and a long-term investor should not be too concerned with the small concerns as they have always outperformed their peers on the longer horizon. Do Consult a financial advisor or do proper research and advisory before making any investment decisions.

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