HDFCBANK Limited Gains Over 3% but Profit Booking Caps Rally

HDFCBANK Limited, referred to as HDFC Bank, gained more than 3% after receiving authorisation to offer Capital Gains Accounts Scheme deposits, but profit booking pulled the stock back to Rs 751.20 early in the session before it traded at Rs 751.55, up 2.11%.

Why did HDFC Bank shares gain more than 3%?

HDFC Bank shares gained after the lender received government authorisation to offer deposits under the Capital Gains Accounts Scheme, 1988. The development placed the stock among the top gainers on the Nifty 50 during trading, with one account putting the intraday advance at 3.2%.

The move also came after a period of pressure on the stock. HDFC Bank had fallen about 27% over the previous year and was trading below its 52-week high of Rs 1,020.50, according to the market discussion. Recent buying interest at lower levels and expectations that margins may be close to their low point have contributed to the rebound narrative.

Why did profit booking emerge in HDFC Bank shares?

Profit booking emerged at higher levels, limiting the rally after the initial rise. The stock fell to Rs 751.20 in early trading and was last seen at Rs 751.55, still up Rs 15.55 or 2.11%, showing that investors retained some buying interest while locking in gains after the sharp intraday move.

Selling after the quarterly results had already highlighted investor caution. In a separate trading session, HDFC Bank traded at Rs 707.60 after extending losses from a 3% slide, as investors booked profits following the Q2 FY27 results. The shares had fallen about 6% since the results in another market update, even though profit growth broadly met expectations.

What did HDFC Bank report in Q2 FY27?

HDFC Bank reported Q2 FY27 standalone net profit of Rs 19,510 crore, up 4.7% year-on-year, while consolidated net profit rose 5.55% to Rs 20,700 crore. The lender said treasury operations restricted reported profit growth, and stated that profit after tax increased 12.6% year-on-year excluding treasury performance.

Core income expanded, but the market focused on the pace of profitability improvement. Net interest income rose 9.7% to Rs 34,620 crore, while net revenue rose to Rs 48,450 crore from Rs 45,900 crore a year earlier. Higher operating costs, weaker treasury income and margin pressure were cited as reasons for the cautious reaction to the earnings release.

Can HDFC Bank margins recover from Q2 FY27 levels?

Market discussions suggest HDFC Bank's net interest margins may have bottomed in Q2 FY27 and could recover from the December quarter, although views differ on the speed of any improvement. The net interest margin contracted to 3.2% from 3.3% in the preceding quarter, while the CASA ratio declined to 31%.

The bank pointed to the impact of a 25-basis-point repo rate hike, noting that 70% of its book is floating and a significant part is linked to the repo rate. A greater mix of higher-yielding retail and MSME lending may support margins, but high deposit costs, deposit mobilisation and the full impact of FCNR(B) in the third quarter remain variables investors are tracking.

What are investors watching after HDFC Bank's share rebound?

Investors are watching whether HDFC Bank can convert an event-led share-price gain into a sustained operating recovery. The key concerns remain slower core income growth, margin pressure, deposit costs and the pace at which the lender can rebuild its earlier advantage in loan growth and profitability after the merger.

Brokerage views cited in the discussion remained positive despite these constraints. Bernstein retained an Outperform rating with a target price of Rs 1,150, while JPMorgan retained an Overweight call with a target of Rs 970. Other named brokerages also maintained positive ratings, pointing to possible margin recovery and leadership transition, though the market remains cautious about near-term earnings growth.

Conclusion

The latest move in HDFC Bank shares reflects two competing signals: government authorisation to offer CGAS deposits and expectations of a margin trough supported a gain of more than 3%, while profit booking showed that investors remain sensitive to earnings and funding concerns. Q2 FY27 delivered higher profit, net interest income and revenue, but reported profit growth was moderated by treasury performance and margins remained under pressure.

The next focus is the December quarter, when investors will look for evidence of margin recovery. Deposit momentum, CASA mobilisation, funding costs and the effect of FCNR(B) will be central to judging whether the expected improvement in operating performance is taking hold.