HDFC Bank Stock: Brokerages See 50% Upside Despite Turmoil

Introduction

HDFC Bank, India's largest private lender, has faced significant market scrutiny following the abrupt resignation of its part-time Chairman, Atanu Chakraborty. The event triggered a sharp sell-off in the stock, raising questions about corporate governance and leadership stability. Despite the near-term volatility, a majority of brokerage firms have reiterated their bullish stance, pointing to the bank's strong fundamentals and viewing the price correction as an attractive entry point for investors.

Chairman's Exit Sparks Market Jitters

The recent turbulence began when Atanu Chakraborty stepped down from his position, citing a misalignment between certain internal developments and his personal values. This unexpected move immediately fueled concerns among investors regarding potential governance issues within the bank. The market's reaction was swift and decisive. On the day of the announcement, HDFC Bank's shares fell 5.1% to close at Rs 799.70, after touching an intraday low of Rs 772. In response to the leadership vacuum, the bank appointed veteran Keki Mistry as the interim chairman for a period of three months, a move aimed at reassuring stakeholders of continued stability.

Brokerages Maintain Bullish Outlook

In the wake of the stock's decline, several leading brokerages issued reports, largely maintaining their positive ratings on HDFC Bank. They collectively see a substantial upside, with some projecting gains of over 50% from current levels. The consensus is that the chairman's resignation does not reflect any deep-rooted operational or financial problems. Management has communicated that the differences leading to the decision were minor and that the bank's long-term strategy and business momentum remain unaffected.

Bernstein noted that business continuity is intact, while Citi expects operating metrics to improve over the medium term. Similarly, Nirmal Bang highlighted the bank's strong asset quality and robust capital position as key drivers for its positive long-term outlook.

Q3 FY26 Earnings: A Mixed Picture

Adding another layer to the analysis are the bank's third-quarter results for fiscal year 2026. HDFC Bank reported a solid 11.5% year-on-year increase in standalone net profit, reaching Rs 18,650 crore. This performance was supported by steady core earnings, a sequential expansion in margins, and lower credit costs. The bank's asset quality remained stable, with gross non-performing assets (NPAs) holding steady at 1.24%. Net interest margins (NIM) showed a welcome improvement of 10 basis points sequentially, rising to 3.3%. However, the results also brought a key concern to the forefront.

The Challenge of Deposit Growth

The primary issue flagged by almost all analysts is the bank's moderating deposit growth. In Q3, deposit growth stood at 12% year-on-year, which lagged behind loan growth. This imbalance has pushed the loan-to-deposit ratio (LDR) to a high of 98.5%. A high LDR can strain liquidity and constrain future lending capacity. Management has clarified that the bank intentionally exited some high-cost wholesale deposits to protect its margins. The leadership team remains confident in its ability to bring the LDR down to 95% by the end of FY26 and into the low nineties by FY27, but analysts agree that accelerating deposit mobilization is critical for a stock re-rating.

Analyst Commentary on Financials

Brokerages have parsed the Q3 numbers with a focus on the deposit issue. CLSA, while reiterating its 'Outperform' rating with a Rs 1,200 target, acknowledged that the 12% deposit growth is a concern. The firm believes the current headwinds are temporary and projects a strong bounce-back in FY27. Jefferies also maintained a 'Buy' call, raising its target price to Rs 1,240, but emphasized that a pickup in deposit growth is essential. Kotak Institutional Equities held an 'Add' rating with a Rs 1,050 target, noting that the bank's guidance for above-industry growth in FY27 underscores the urgent need for stronger deposit collection.

Valuation and Technical Signals

Following the recent correction, HDFC Bank's valuation has become more attractive. The stock has underperformed the Nifty Bank index and now trades at a price-to-book discount of 10-12% relative to its peer, ICICI Bank. This valuation gap, combined with the bank's strong franchise, is a key part of the bullish thesis. From a technical standpoint, a bullish stochastic crossover signal appeared on the weekly chart on March 27, 2026, originating from an oversold region. Historically, such signals have preceded price gains for the stock, adding a layer of technical support to the fundamental arguments.

Conclusion

HDFC Bank is currently navigating a challenging period marked by a high-profile leadership change and persistent concerns over its deposit growth rate. The resulting stock price correction reflects these near-term uncertainties. However, the bank's core profitability remains robust, asset quality is stable, and management is actively addressing the liquidity situation. The overwhelming consensus among financial analysts is that these issues are temporary. With strong upside potential projected by multiple brokerages and a more reasonable valuation, the long-term outlook for HDFC Bank appears positive, though investors will be closely watching for improvements in deposit mobilization in the upcoming quarters.