- Shares of HDFC Bank fell over 10% in seven sessions after Q1 earnings announcement
- Bank showed steady profit and loan growth but NII growth and margins disappointed
- Investors expected faster margin improvement post-merger, but gains are delayed
Shares of India's biggest private lender HDFC Bank fell as much as 10% in the last seven trading sessions following the declaration of April to June quarter as investors still assess impact of quarterly earnings.
The stock has remained under pressure despite the bank delivered steady profit and loan growth, while concerns over slower-than-expected net interest income growth and a lack of improvement in net interest margins have weighed on sentiment.
Market expert believes that investors expected HDFC Bank's profit margins to improve faster after the merger, but the latest results showed that this improvement is taking longer than expected.
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According to Harshal Dasani, Business Head at INVasset PMS, "The seven-day losing streak in HDFC Bank, a cumulative fall of just over 10 percent to the Rs 741 zone near its 52-week low, is the market's extended verdict on the Q1 print, and the verdict is about timing rather than quality. The quarter itself was steady, with PAT up 5 percent to ₹19,060 crore and advances growing 15.4 percent, but NII growth of 7 percent came in below estimates and the NIM stayed flat at 3.26 percent. That margin print is what the street is punishing, because the entire post-merger investment case rests on NIM expansion as high-cost borrowings run off, and every quarter the margin stays flat pushes the earnings-acceleration story one quarter further out.
Despite this, the bank's core business remains strong, and the recent decline could offer a good buying opportunity for long-term investors if earnings improve in the coming quarters.
Dasani said, "The technical picture confirms the repricing is institutional, with the stock trading below all key moving averages from the 5-day to the 200-day and delivery volumes signalling reduced conviction rather than panic. The important distinction is what this is not. It is not a sector signal, because ICICI, Axis, and the broader private-bank cohort printed well and have held their ground; HDFC is underperforming its own sector, which makes this a single-name timeline repricing inside a healthy banking cycle. The framework from here is that a 10 percent drawdown in the most widely owned bank in India, against a franchise whose deposit engine and distribution moat remain intact, historically builds the entry rather than breaks the case.
He further advised investors, "Fresh positioning still needs one of two confirmations: a visible NIM inflection in the Q2 commentary as deposits reprice lower, or the price itself printing a base with volume exhaustion. Until either arrives, the streak can extend, but for long-horizon investors the risk-reward at these levels is turning attractive for the first time in several quarters."
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