HDFC Bank has received a strong endorsement from CLSA, which has reiterated its Buy recommendation with a target price of ₹1,200 per share. This target represents a significant upside potential of 28.20% from current trading levels, as the stock currently trades around ₹936 per share with a market capitalization of ₹14,39,996.43 crores.

CLSA's Investment Rationale

CLSA believes that current concerns surrounding HDFC Bank are largely temporary or misunderstood. The brokerage firm identifies that issues related to margins, deposit growth, and post-merger adjustments have created short-term market noise, which has negatively impacted investor sentiment despite the bank's strong long-term fundamentals.

The brokerage highlights that while the loan-to-deposit ratio has risen to nearly 99%, above management's near-term target, this should be viewed as a transitional phase rather than a long-term risk. CLSA expects core pre-provision operating profit (PPOP) to grow at a high-teens CAGR, supporting earnings recovery.

Valuation Advantage Over Peers

From a valuation perspective, CLSA notes that HDFC Bank is currently trading at a 10-12% discount to ICICI Bank. With FY27 expected to be a bounce-back year, the brokerage views the current risk-reward scenario as highly attractive, presenting a good opportunity for investors to buy into a strong banking franchise.

December 2025 Business Performance

HDFC Bank reported steady business growth as of December 31, 2025, demonstrating resilience across key metrics:

The steady rise in deposits and CASA balances highlights the bank's ability to attract stable, low-cost funding while maintaining balance sheet strength. This continued demand for loans across key segments is supported by the bank's strong customer franchise and diversified lending portfolio.

Recent Financial Performance

The bank's recent quarterly results demonstrate strong operational performance:

Over the last three years, HDFC Bank's Net Interest Income and net profit have grown at a CAGR of 25.38% and 24.40% respectively. The bank maintains strong return ratios with ROCE at 7.51% and ROE at 14.40%, along with an earnings per share of ₹47.20.

Market Outlook

CLSA's positive stance reflects confidence in HDFC Bank's ability to navigate current challenges and capitalize on its market position as India's largest private sector bank. The brokerage expects margins to gradually improve as the balance sheet normalizes, supporting the bank's long-term growth trajectory in the competitive banking sector.

HDFC Bank shares exhibited mixed trading patterns on Tuesday, paring early gains to close flat despite receiving strong endorsement from global brokerage CLSA. The stock demonstrated initial strength before succumbing to broader market weakness during afternoon trading sessions.

Stock Performance and Market Movement

HDFC Bank shares reached an intraday high of ₹947.70 during morning trade, representing a gain of approximately 1.10% before retreating to ₹936.50 by afternoon. The stock's performance contrasted with broader market sentiment, as benchmark indices BSE Sensex and Nifty 50 declined by about 0.50% each amid volatile trading conditions.

CLSA's Bullish Assessment

CLSA reiterated its 'Outperform' rating on HDFC Bank with a target price of ₹1,200 per share, suggesting potential upside of 28% from current levels. The brokerage addressed investor concerns regarding the bank's operational metrics, particularly focusing on deposit growth challenges and the elevated loan-to-deposit ratio of approximately 99%.

The research firm characterized recent investor frustrations as largely misconceived or temporary in nature. CLSA noted that expectations for immediate margin improvement following the merger have been misplaced, projecting FY27 as a more realistic timeline for the bank's bounce-back performance.

Valuation Analysis and Market Position

CLSA highlighted attractive valuation opportunities following the stock's recent correction of 6-7% since the Q3 FY26 operational update. The brokerage emphasized that HDFC Bank currently trades at a 10-12% price-to-book discount compared to ICICI Bank, presenting value for long-term investors.

Upcoming Financial Results

The bank is scheduled to announce its Q3 FY26 earnings results on Saturday, January 17. Market participants will closely monitor key performance indicators including deposit growth trends, net interest margins, and asset quality metrics during the earnings announcement.

As India's largest private sector lender by market capitalization, HDFC Bank's performance continues to influence broader banking sector sentiment and serves as a bellwether for the financial services industry.