SHARES of HDFC Bank fell as much as 4.2 per cent after Nomura Holdings downgraded the stock, prompted by the lender’s lowered revision of the business absorbed from its parent.

The downgrade of India’s largest private sector bank to neutral from buy – the first since its July merger – turned the stock into the NIFTY 50 Index’s worst performer on Wednesday (Sep 20) and the biggest point drag. The shares have fallen 6 per cent in two trading sessions.

“We struggle to see upside over next 12 months,” Nomura analysts, led by Param Subramanian, wrote in a note on Wednesday, citing concerns over HDFC’s return on assets and loan growth pressures.

In July, HDFC Bank merged with its parent HDFC, hoping to broaden their business lines beyond traditional banking products.

In a presentation to analysts on Monday, HDFC Bank said it valued the net worth of its parent’s business at 1.12 trillion rupees (S$18.4 billion) as of July, about 16 per cent lower than its reported number in March.

The adjustment was due to the valuation based on Indian GAAP accounting rules and certain merger-related compliances, the company said.

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HDFC Bank has 44 buys, three holds and no sells, according to data complied by Bloomberg. BLOOMBERG