HDFC Bank shares rise today after CLSA reiterates ‘outperform’ call, erases gains later; check upside

HDFC Bank

• HDFC Bank traded flat despite CLSA's bullish stance and 'Outperform' rating
• CLSA set a target price of Rs 1,200, seeing concerns as temporary
• HDFC Bank stock is up 15 percent in a year, outperforming Nifty 50

Did our AI summary help?

Shares of HDFC Bank pared early gains and were trading flat by afternoon on Tuesday, even as CLSA reiterated its bullish stance on the stock, with as much as 28 percent upside. The brokerage played down investor concerns around deposit growth and the elevated loan-to-deposit ratio.

HDFC Bank stock was last seen at Rs 936.5 in afternoon trade, little changed on the day, after touching an intraday high of Rs 947.7 in the morning, when it was up about 1.1 percent. The stock remains up around 15 percent over the past year, outperforming the Nifty 50’s roughly 11 percent gain over the same period.

Broader market was trading weak on Tuesday, with benchmark indices BSE Sensex and Nifty 50 shedding about 0.5 percent each, amid a volatile session. Banking index Bank Nifty lost 0.1 percent in the afternoon after staying in green through the day.

In a note, CLSA reiterated its ‘Outperform’ rating on HDFC Bank with a target price of Rs 1,200 per share. The brokerage noted that the stock has corrected 6-7 percent since the Q3 FY26 operational update. It described that this correction comes amid a growing frustration among investors over moderating deposit growth and a rise in the loan-to-deposit ratio to about 99 percent.

• Also read | Cash segment margin likely to reduce, SEBI panel endorses margin rationalisation proposal

However, CLSA argued that most of these concerns are either misconceived or temporary. It said expectations of immediate margin improvement following the merger -- despite refinancing wholesale bonds with deposits -- have been misplaced, and that FY27 is more likely to mark a ‘bounce-back’ year for the bank.

The brokerage also highlighted valuation comfort, noting that after the recent correction, HDFC Bank is trading at a 10-12 percent price-to-book discount to ICICI Bank, and said it is an opportunity for investors to look past near-term noise and focus on the franchise’s longer-term strengths.

HDFC Bank, India’s largest private sector lender by market capitalisation at about Rs 14.4 lakh crore, is currently valued at around 19.9 times earnings, with a dividend yield of roughly 1.18 percent. The bank is scheduled to report its Q3 FY26 earnings on Saturday, January 17.

Disclaimer: The views and investment tips expressed by investment experts on Moneycontrol.com are their own and not those of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.