HDFC Bank shares are drawing attention after its American Depositary Receipt fell 6.33% to $34.17 on Tuesday. This comes even as India's largest private sector lender reported robust growth across key business indicators for the third quarter ended December, according to its latest operational update.

Strong Q3 Performance Metrics

The bank demonstrated solid operational momentum with gross advances surging 11.9% year-on-year to ₹28.4 lakh crore, signaling sustained credit demand. Average advances for the quarter stood at ₹28.6 lakh crore, representing a 9% increase from the same period last year.

On the deposit front, momentum remained equally strong. Average deposits grew 12.2% year-on-year to ₹27.5 lakh crore, while average CASA deposits rose 9.98% to ₹8.9 lakh crore, indicating healthy low-cost funding growth.

Market Performance and Analyst Outlook

Shares of HDFC Bank have fallen 42.85% in the last 12 months and currently trade with a relative strength index of 52, which suggests neutral market sentiment. The recent ADR decline contrasts sharply with the bank's strong operational performance.

Despite the stock's underperformance, analyst sentiment remains overwhelmingly positive. Out of 48 analysts tracking the company, 46 maintain a 'buy' rating, two recommend a 'hold,' while none suggest 'sell,' according to Bloomberg data. The average 12-month consensus price target of ₹1,157 implies an upside of 16.9%.

Banking Sector Context

The banking sector has shown mixed performance for the December quarter, with HDFC Bank's strong showing contrasting against peers like IndusInd Bank, which reported a 13% year-on-year decline in net advances to ₹3.18 lakh crore. Meanwhile, Axis Bank posted solid growth with gross advances jumping 14% to ₹11.70 lakh crore, and Kotak Mahindra Bank delivered a 16% increase in net advances to ₹4.80 lakh crore.

The divergent performance between HDFC Bank's ADR movement and its operational metrics highlights the complex interplay between global market sentiment and domestic banking fundamentals, with investors closely monitoring how the bank navigates current market conditions.

The Indian banking and financial services sector demonstrated remarkable resilience and growth momentum during Q3 FY26, with major institutions across segments reporting strong business expansion. From non-banking financial companies to public and private sector banks, the comprehensive performance data reveals a sector firing on all cylinders, driven by robust deposit mobilization and credit growth.

NBFC Sector Performance

Bajaj Housing Finance emerged as a standout performer with exceptional growth across key operational metrics. The company's gross disbursements reached impressive levels, while its asset base expanded significantly year-over-year.

Bajaj Finance continued its expansion trajectory with substantial customer base growth and strong asset quality. The company's customer franchise reached 115.40 million as of December 31, 2025, compared to 97.12 million in the previous year, representing an addition of 18.28 million customers. New loans booked grew 15% to 13.90 million in Q3 FY26, while AUM expanded 22% to approximately ₹4,85,900.00 crore. The deposits book stood at ₹71,000.00 crore, up from ₹68,797.00 crore in December 2024.

Public Sector Banking Excellence

Bank of Baroda delivered comprehensive growth across its global operations, with particularly strong performance in retail advances. The bank's global business expanded 12.22% year-over-year to ₹28,90,661.00 crore, driven by robust domestic operations.

Bank of India and IDBI Bank also reported strong provisional performance, with Bank of India's global business reaching ₹16,27,098.00 crore, up 12.50% year-over-year, while IDBI Bank's total business expanded to ₹5,46,634.00 crore, reflecting a robust 12% increase from ₹4,89,245.00 crore.

Small Finance Bank Momentum

The small finance banking segment demonstrated exceptional growth momentum, with multiple institutions reporting double-digit expansion rates. AU Small Finance Bank led the charge with total deposits climbing 23.3% year-over-year to ₹1,38,420.00 crore, while gross advances expanded 24% to ₹1,25,210.00 crore.

Ujjivan Small Finance Bank posted total deposits of ₹42,219.00 crore, up 22.2% from ₹34,494.00 crore, with gross loan book expanding 21.6% to ₹37,055.00 crore. Sequential quarter-on-quarter growth remained strong at 7.5% for deposits and 7.1% for loans.

Regional Banking Performance

Regional banks also contributed to the sector's positive performance, with Bandhan Bank reporting loans and advances reaching ₹1,45,227.00 crore, up 10% year-over-year, while total deposits grew 11.1% to ₹1,56,723.00 crore. Jammu & Kashmir Bank's total business grew to ₹2,72,109.27 crore, up 13.34% year-over-year, with deposits reaching ₹1,55,861.35 crore, representing 10.58% growth.

Union Bank of India reported gross advances reaching ₹10,16,805.00 crore, up 7.13% year-over-year from ₹9,49,164.00 crore, while Equitas Small Finance Bank's gross advances touched ₹43,269.00 crore, marking a 15.86% year-over-year increase. The comprehensive performance across institutions reflects the sector's fundamental strength and growth potential in the current economic environment.