Is the Worst Over for HDFC Bank's Stock?

Brokerages have turned bullish on the bank's prospects. Something has changed

- T. Surendar

Late last month, HDFC Bank's market valuation crossed ₹15 trillion, a landmark so far achieved only by Reliance Industries and Tata Consultancy Services. The record came after its shares ran up 35% in the last 12 months, helping it become the second-most valuable company by way of market capitalization.

And subsequent to its latest quarter and annual results for fiscal year 2025 (FY25), broking firms have turned bullish on the bank's prospects, raising the target price for its shares to between ₹2,250 and ₹2,340. That would mean a 17-22% increase from current share price levels of ₹1,924, resulting in a market valuation of about ₹17.75 trillion. In dollar terms, at a valuation of $210 billion, it would be as big as Bank of China and rank seventh in the global pecking order of top banks.

The achievement, at this juncture, is noteworthy. The proliferation of private banking started after the economic liberalization in the early 1990s; a new crop of banks like IndusInd, ICICI and HDFC Bank made their appearance. In the last two decades, if the Indian economy has grown nearly 5x from a gross domestic product (GDP) of $800 billion in 2005 to $3.9 trillion in 2024, the valuation of the banking and financial services sector grew 50x. Now, as the Indian economy is further slated to grow to a $10 trillion economy, a private bank at the top of the valuation league table may well make it an important market bellwether.

Says Abhay Modi, head of research at Helios Mutual Fund, who has tracked HDFC Bank for two decades: "Banking business is a solid proxy to play the Indian economic growth. Among banks, HDFC Bank has been our top pick as it has the balance sheet to scale up and has the best retail presence to tap into the growing per capita wealth."