HDFC Bank’s forced balancing act drags stock, makes it Nifty Bank’s biggest laggard. What to do?

HDFC Bank shares continue to underperform despite largely in-line Q3 earnings and positive commentary from leading brokerages. India’s largest private lender has been the worst performer in the Nifty Bank index over the past six months, sliding 6%. While the broader outlook remains constructive, the bank finds itself in a delicate balancing act between loan growth and deposit mobilisation.

HDFC Bank’s Q3FY26 earnings show steady undertones, with the lender’s profit after tax (PAT) ahead of Elara’s estimates, while the pre-provisioning operating profit (PPoP) was in line with the brokerage’s estimates.

Axis Securities, in its Q3 review, also maintained a buoyant growth outlook for HDFC Bank following its in-line PAT and net interest income (NII), though PPoP was below its estimates.


HDFC Bank on Saturday reported an 11% jump in its December quarter standalone net profit at Rs 18,654 crore compared to Rs 16,735 crore reported in the year-ago period. HDFC Bank’s net interest income (NII) for the quarter ended December 31, 2025, grew by 6.4% to Rs 32,620 crore from Rs 30,650 crore for the quarter ended December 31, 2024. Core net interest margin stood at 3.35% on total assets and 3.51% based on interest-earning assets.

Read more: HDFC Bank Q3 Results: PAT jumps 11% YoY to Rs 18,654 crore, beats estimates; NII up 6.4%

What’s holding the stock?

Amid concerns around deposits, HDFC Bank finds itself in a vicious web of balancing too many variables. “We have been arguing about its conundrum to manage growth vs NIM vs LCR vs CD (or LDR) ratio outcomes, which are likely to cause dislocation,” Elara said in a note.

While 12% YoY loan growth in Q3FY26 reflects a trend reversal, FY25 tells the tale of sub-6% YoY loan growth in its bid to accelerate the CD ratio outcome, Elara said. Deposit growth of 11.6% YoY was lower in Q3FY26, with the ratio going up again. Elara expects it to remain stretched, despite the bank directionally maintaining guidance for a lower CD ratio.

A high CD ratio has the potential to strain liquidity as it leaves little buffer to meet withdrawals and could force a bank to borrow at higher costs.

“Deposit needs in FY27 may call for stickier costs, feeding into challenges as the bank tries to balance between LCR vs LDR vs growth vs NIM outcomes,” Elara said.

Systematix also echoed concerns over moderation in deposit growth, even as credit growth met its expectations.

Moreover, BNP Paribas sees CASA growth as a conundrum that could impact the bank’s re-rating. It said that anaemic CASA growth could likely delay HDFC Bank in achieving the ROA and ROE levels necessary for a full valuation re-rating.

Axis Securities opines that it will take constructive steps to strengthen HDFC Bank’s retail-focused deposit franchise, with an emphasis on mobilising CASA deposits.

What should investors do?

The management has expressed confidence in the medium-term growth trajectory, with LDR normalisation to near pre-merger levels and confidence in delivering better-than-system credit growth in FY27.

The management reiterated that the bank’s CD ratio will continue to glide downwards. It expects the bank to meet its FY27 target of moderating the CD ratio in the range of 88% to 92%.

“…with pick-up in growth visible in Q3 and the momentum expected to persist going into Q4, we expect HDFCB to exit FY26 with credit growth of 13%. This is expected to further accelerate to 15% CAGR over FY26 to FY28E,” the Axis note said.

Elara Capital sees a favourable risk-reward in HDFC Bank after the recent correction, valuing the stock at 1.9x FY28E P/BV.

Brokerages have maintained their Buy view on the stock, with the sharpest upside of 57% pegged by BNP Paribas.

Elara Capital: Buy | Target: Rs 1,147 | Upside: 24%

Systematix: Buy | Target: Rs 1,170 | Upside: 26%

BNP Paribas: Outperform | Target: Rs 1,460 | Upside: 57%

Axis Securities: Buy | Target: Rs 1,190 | Upside: 28%

Technical view

Technical analyst Anuj Gupta said that the stock appears weak and has formed lower tops and lower bottoms. Additionally, bearish candlestick patterns have formed, suggesting unfavourable trends. The stock has strong support at Rs 880 levels and resistance at Rs 960 levels, said Gupta, who sees further correction up to Rs 900 to Rs 880.

(Disclaimer: The recommendations, suggestions, views, and opinions given by experts are their own. These do not represent the views of The Economic Times.)