Has JPMorgan Downgraded HDFC AMC to 'Neutral' Amid Slower Growth?
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Synopsis
JPMorgan's recent downgrade of HDFC AMC raises questions about the future of equity inflows. As the firm sees slowing growth amidst changing investor behaviors, can HDFC AMC adapt to these challenges and maintain its position in the market? Discover the insights behind this pivotal shift.
Key Takeaways
- HDFC AMC's rating downgraded from 'overweight' to 'neutral'
- Target price remains at Rs 5,000
- Equity inflows fell to Rs 19,000 crore in May
- SIP inflows remain strong at Rs 26,700 crore
- 16 percent annual AUM growth expected
Mumbai, June 16 (NationPress) - On Monday, JPMorgan revised its rating for HDFC Asset Management Company (HDFC AMC) from ‘overweight’ to ‘neutral’, attributing this shift to a decline in equity inflows and a trend of stabilizing asset allocation among households.
The global brokerage has maintained its target price at Rs 5,000, indicating that the stock is already fairly valued at its present levels.
JPMorgan notes that India’s nominal GDP growth, estimated at around 10-11 percent, coupled with a temporary halt in the shift towards equities by households, has influenced this revised perspective.
The stock is presently trading at 37 times and 33 times its projected earnings for FY26 and FY27, respectively, which the firm believes incorporates much of the anticipated future potential.
Despite steady equity inflows into mutual funds over recent years due to favorable economic conditions and low inflation, there has been a noticeable slowdown in recent months.
In May, equity inflows amounted to only Rs 19,000 crore, marking the lowest figure in the past year, primarily due to profit booking and increasing investor caution.
On a brighter note, SIP (Systematic Investment Plan) inflows remain robust, with May seeing inflows of Rs 26,700 crore.
The number of active SIP accounts has surged to 85.6 million. JPMorgan views this as a positive sign of long-term investor trust and believes that this stability warrants higher valuations.
Even after the downgrade, JPMorgan anticipates HDFC AMC will achieve a healthy annual growth rate of 16 percent in assets under management (AUM) over the coming three years.
The firm also posits that the merger of HDFC with HDFC Bank could enhance the AMC's distribution channels, potentially leading to better-than-expected growth.
If realized, this could introduce an upside risk to their current forecasts.
JPMorgan predicts that the company's EBIT will average approximately 37 basis points of AUM over the next three years, driven by improved cost management.
Currently, about 64 percent of HDFC AMC’s AUM is allocated to equity, its highest-yielding asset class, bolstered by strong performance in its key funds.
Point of View
I believe that JPMorgan's downgrade of HDFC AMC reflects broader market trends and investor sentiments. It underscores the importance for asset management firms to adapt to changing economic scenarios while maintaining investor confidence. We must continue to monitor these developments closely.
NationPress
16/06/2025
Frequently Asked Questions
Why did JPMorgan downgrade HDFC AMC?
JPMorgan downgraded HDFC AMC due to slowing equity inflows and a stabilizing trend in household asset allocation.
What is the new target price for HDFC AMC?
The target price for HDFC AMC remains unchanged at Rs 5,000.
How much did equity inflows drop in May?
In May, equity inflows fell to Rs 19,000 crore, the lowest in the past year.
What growth rate does JPMorgan expect for HDFC AMC?
JPMorgan expects HDFC AMC to grow its AUM at a rate of 16 percent annually over the next three years.
How many active SIP accounts are there currently?
There are currently 85.6 million active SIP accounts.
