- Jefferies and Morgan Stanley view HDFC Bank's recent share dip as a buying opportunity
- JPMorgan upgraded HDFC Bank to Overweight despite lowering its target price to Rs 1,010
- Jefferies maintains a Buy rating with a target price of Rs 1,240 citing attractive valuations
Top brokerages, Jefferies and Morgan Stanley, remain constructive on HDFC Bank despite recent governance-driven volatility, with both flagging the sharp correction as a buying opportunity. While JPMorgan has upgraded the stock, Jefferies has stuck to its target price which shows an approximately 64% upside from current levels.
JPMorgan has upgraded the stock to Overweight from Neutral, even as it trimmed its target price to Rs 1,010 from Rs 1,090, arguing that much of the near-term earnings risk is already priced in. The brokerage believes the bank's core franchise remains intact, backed by strong asset quality and a robust liability base—key advantages in an uncertain macro environment. JPMorgan sees system credit growth improving and expects a positive inflection in return on assets as higher-cost borrowings are gradually replaced by low-cost deposits. That said, it cautions that a constrained deposit environment could continue to weigh on sentiment and earnings in the near term.
Jefferies, meanwhile, remains more emphatic, maintaining a Buy with a target price of Rs 1,240. It sees current valuations—at 1.6x FY27E adjusted price-to-book—as attractive following the correction, placing HDFC Bank at a discount or low premium to peers. Jefferies argues that sensitivities to higher credit costs and slower topline growth remain manageable, and flags clarity on board issues and leadership continuity as potential catalysts for a rerating.
Shares of HDFC Bank came under pressure following the abrupt resignation of chairman Atanu Chakraborty on ethical grounds, effective March 18—an unprecedented mid-term exit for a part-time chairman that sparked concerns around governance. The stock has since fallen about 10%, a decline Jefferies views as an attractive entry point for long-term investors.
HDFC Bank Stock Card
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The brokerage notes that HDFC Bank continues to remain among its top sector picks, with current valuations offering a strong risk-reward. At 1.6x FY27E adjusted price-to-book, the stock is trading at a discount and only a low premium to peers. Jefferies believes these valuations are appealing, given the bank's stronger asset quality, healthy growth and good return on equity profile.
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The brokerage acknowledged sensitivity to higher credit costs and potential lower topline stating these risks as manageable and not detrimental to the bank's overall investment case. The brokerage believes that greater clarity on board-level issues, including the rollover of the CEO's term and the appointment of a new Chairman, could act as key catalysts for a valuation re-rating.
HDFC Bank has recently appointed external law firms to independently examine the issues highlighted in the resignation letter by Atanu Chakraborty as part of a proactive step to ensure an objective and fact-based assessment. The bank's spokesperson said the appointment of external law firms is a proactive measure taken by the bank to independently look at the aspects mentioned in the letter so as to ensure an objective and fact-based assessment.
Out of 47 analysts tracking the company, 46 maintain a 'buy' rating while one maintains a "hold" rating, according to Bloomberg data. The average 12-month consensus price target of Rs 1134.36 implies an upside of 50%
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