HDFC Bank Q4 Update: Analysts Issue 'Buy' Ratings on Strong Deposit Growth

Introduction

HDFC Bank has become a focal point for investors and analysts following its March quarter business update, which prompted positive recommendations from several brokerage firms. Despite the stock facing significant pressure and declining roughly 25% in 2026, firms like MOFSL, Bernstein, and Macquarie have issued 'Buy' and 'Outperform' ratings. The renewed optimism is largely driven by the private lender's strong performance in deposit mobilization and steady credit expansion, which has helped address key investor concerns.

A Strong Quarterly Business Performance

The bank's business update for the quarter ending March 2026 revealed healthy operational metrics. Gross advances saw a significant increase, growing by 12% year-over-year (YoY) and 4% quarter-over-quarter (QoQ) to reach ₹29.6 lakh crore. This growth translates to an absolute loan addition of ₹1.15 lakh crore during the fourth quarter, a notable increase from the ₹1 lakh crore added in the same period last year. This steady expansion in the loan book was largely in line with analyst expectations.

Deposit Growth Surpasses Expectations

A key highlight of the update was the bank's performance in deposit collection, which surpassed market estimates. This robust growth came amidst a highly competitive environment for deposits across the banking industry. Average deposits grew by 12.8% YoY, while the average Current Account and Savings Account (CASA) deposits increased by 10.8% YoY. The strong inflow of deposits had a direct and positive impact on the bank's key financial ratios.

Improvement in Credit-to-Deposit Ratio

The impressive deposit growth outpaced the expansion in advances, leading to a sequential decline in the Credit-to-Deposit (CD) ratio. According to MOFSL, the CD ratio improved significantly, falling to 95.3% in the fourth quarter from 99.5% in the previous quarter. This reduction is a crucial development, as it addresses one of the primary concerns investors have had regarding the bank's high reliance on borrowing to fund its loan growth. A lower CD ratio indicates a more stable and self-reliant funding profile.

Analyst Commentary and Ratings

The positive operational data prompted favorable reviews from analysts. Motilal Oswal Financial Services (MOFSL) issued a 'Buy' recommendation, highlighting the sharp decline in the CD ratio. Similarly, global brokerage firms Bernstein and Macquarie reiterated their 'Outperform' ratings on the stock. SBI Securities also noted that the bank's strong deposit franchise underpinned its ability to gather deposits despite industry-wide competitive pressures.

Price Target Revisions

In line with their positive ratings, several firms have provided optimistic price targets for HDFC Bank's stock. Macquarie has suggested a target price of ₹1,200, while Bernstein has set a target of ₹1,150. Motilal Oswal has also recommended a target price of ₹1,175. These targets suggest a significant potential upside from the stock's current market price, reflecting the confidence analysts have in the bank's fundamental strength.

Investor Sentiment and Stock Performance

Despite the bullish analyst outlook, the stock's recent performance reflects underlying market concerns. The share price has fallen by approximately 25% since the beginning of 2026. Adding to this, shareholding data for the March quarter showed that Foreign Portfolio Investors (FPIs) reduced their stake in the bank to 44.05% from 47.67% in the December quarter. This divergence between analyst ratings and investor actions highlights the ongoing debate about the bank's valuation and near-term challenges.

Future Earnings Outlook

Looking ahead to the full Q4 results, analysts are projecting continued growth. YES Securities forecasts a 5.8% YoY rise in net profit to ₹18,640 crore and a 5.5% increase in Net Interest Income (NII) to ₹33,834 crore. The firm anticipates that Net Interest Margins (NIM) will see a slight sequential improvement as the rise in yield on advances is expected to outpace the cost of deposits. Furthermore, fee income growth is projected to be strong, while operating expenses are expected to grow at a slower pace than business growth.

Conclusion

HDFC Bank's March quarter business update has provided a much-needed boost of confidence. The strong performance in deposit growth and the consequent improvement in the CD ratio have been well-received by the analyst community, leading to a wave of positive ratings. While the stock has underperformed in 2026 and faces challenges from reduced FPI holdings, the underlying operational strength suggests a resilient business model. The upcoming detailed financial results will be critical in determining if this operational momentum can translate into improved market sentiment and stock performance.