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HDFC's relative superiority across parameters such as return on shareholder funds, lower proportion of bad loans, a comfortable capital adequacy ratio and its low-risk tag make it appealing from a long-term perspective. HDFC is also attractive from the perspective of stability and business growth prospects.

It has consistently reported profit growth of about 20 per cent for several quarters now. In terms of price fluctuations, the stock is half as volatile as comparable banking stocks.

This makes it a valuable addition to a portfolio, especially when there is excessive price volatility.

HDFC trades at an attractive price-to-book ratio of less than two, if we consider its equity investments and its ownership stake in insurance, mutual funds and BPO ventures.

S. Vaidya Nathan

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