HDFC Bank has been going through a turbulent phase, with a series of operational, governance and management-related concerns weighing on investor sentiment.
Shares of the country's most valued private sector lender have significantly underperformed the broader market. HDFC Bank stock price has declined more than 28% year-to-date (YTD), compared with a 3.3% fall in the Bank Nifty and an 8.4% decline in the Nifty 50 during the same period.
With this decline, HDFC Bank shares are on track for their worst annual performance since 2008. The selloff has also wiped out more than Rs 4 lakh crore from the bank's market capitalisation this year.
What Are The Concerns?
HDFC Bank's part-time Chairman Atanu Chakraborty resigned on March 18, 2026, citing differences over values and ethics. The RBI subsequently approved Rajiv Kumar as the bank's new part-time Chairman in July.
The bank later faced scrutiny over alleged extra interest payments to Maharashtra State Road Development Corporation (MSRDC). Following an internal review, HDFC Bank classified the matter as “business overreach” rather than fraud or personal misconduct and imposed monetary penalties and issued warning letters to three senior executives, including CEO Sashidhar Jagdishan.
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The controversy has also triggered a US securities class-action lawsuit against the bank.
The biggest overhang, however, emerged on August 29, when Jagdishan decided not to seek reappointment as MD & CEO. His tenure ends on October 26, 2026, with the board now set to expedite the succession process. NDTV Profit had earlier reported that Deputy MD Kaizad Bharucha could be among the candidates for the top post.
What Do Fundamentals Say?
HDFC Bank continues to face some unresolved issues following its merger with HDFC Ltd. These include the balance-sheet construct in terms of the loan-to-deposit ratio, lower net interest margins due to an unfavourable incremental loan mix, pressure on core return on assets and a gap between management guidance and execution.
The bank's gross advances rose 15.4% year-on-year (YoY) to Rs 30.61 lakh crore in Q1FY27, while deposits increased 14.7% to Rs 31.71 lakh crore.
Operating profit declined 21.2% to Rs 28,168 crore, while net interest margin contracted 9 basis points to 3.35%. Asset quality, however, remained healthy.
From a valuation perspective, HDFC Bank stock is trading at a significant discount to its historical averages. Its current price-to-book ratio stands at around 1.78x, compared with a five-year average of 2.90x, while its one-year forward P/B is around 1.64x.
Is It An Opportunity To Buy HDFC Bank Shares?
Avinash Gorakshakar, Founder and Head Research AvinashMentor Research believes HDFC Bank's recent slide looks less like a broken story and more like a discounted franchise waiting for its next chapter.
“After a sharp YTD fall and a fresh 52-week low, HDFC Bank stock now trades at roughly 1.3–1.6x FY28 adjusted book value, well below its historical premium,” Gorakshakar said.
He believes the stock offers a high-conviction entry opportunity for long-term, valuation-conscious investors who can tolerate 6–12 months of volatility around the leadership transition and execution-related concerns.
“The risk is not the franchise; it's the timing of the turnaround. If the board signals a clear, decisive succession plan soon, sentiment could pivot faster than earnings,” he added.
Saurabh Jain, Head of Fundamental Research at SMC Global Securities, said HDFC Bank continues to have strong long term fundamentals despite the near-term operational challenges.
He highlighted the bank's capital adequacy ratio of 19.6% and the RBI's approval for LIC to raise its stake in HDFC Bank to 9.99% as indicators of institutional confidence in its financial strength.
“Near-term pressure stems from leadership uncertainty, with CEO Sashidhar Jagdishan's term ending in October 2026, alongside margin compression following the 2023 merger. Overseas mis-selling allegations add minor reputational drag, though the financial impact remains negligible,” Jain said.
He added that HDFC Bank's dominant market position and extensive distribution network should support long-term compounding once the leadership transition is completed and post-merger margins begin to normalise.
According to analysts at PL Capital, HDFC Bank may also put forward an external name for its MD & CEO post, as it would be negative. The analysts believe near-term pressure may persist till succession clarity emerges, although HDFC Bank stock is attractive at 1.4x March 2028E core ABV, which is at 30% discount to ICICI Bank, but medium-term return would hinge on strategy and execution.
PL Capital retained a ‘Buy' rating on HDFC Bank shares, but slashed its target price to Rs 950 from Rs 1,040.
At 1:40 PM, HDFC Bank share price was trading 0.77% higher at Rs 706.35 apiece on the BSE.
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Disclaimer: The views and opinions expressed by the investment advisers on NDTV Profit are of their own and not of NDTV Profit. NDTV Profit advises users to consult with their own financial or investment adviser before taking any investment decision.
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