Jefferies Remains Bullish on HDFC Bank Despite Recent Stock Decline
Optimism Amidst Stock Price Drop
Jefferies, a global brokerage firm, expresses strong confidence in HDFC Bank, even as its stock has plummeted by 26% in 2026. The firm views this decline as an appealing opportunity for investors, maintaining its recommendation of HDFC Bank as a top choice within the banking sector. Jefferies has assigned a 'Buy' rating to the stock, setting a target price of Rs 1,240, which suggests a potential upside of approximately 64% from its last closing price of Rs 756.20. Furthermore, the firm anticipates significant gains for the bank’s American Depository Receipts (ADRs), projecting an increase of nearly 50% to $40.
As of Monday at 1:20 PM, HDFC Bank shares were trading at Rs 741.45 on the NSE. Jefferies pointed out that the bank's recent struggles relative to its competitors stem from concerns regarding leadership transitions and geopolitical issues. However, the brokerage believes that the current valuation drop is excessive. They noted that with valuations at 1.6 times FY27E adjusted price-to-book and 13 times price-to-earnings, HDFC Bank is trading at a discount compared to larger private banks and only slightly above its peers.
Investor sentiment has soured following the resignation of chairman Atanu Chakraborty, who cited discrepancies between the bank's practices and his personal ethics in his departure note. Additionally, Jefferies’ leading equity strategist, Christopher Wood, has recently excluded HDFC Bank from key investment portfolios, raising further concerns among investors. Despite these challenges, Jefferies maintains that the issues are likely to be temporary rather than indicative of deeper structural problems.
Looking forward, Jefferies remains optimistic about the bank's fundamental strengths, highlighting its robust asset quality, consistent growth, and strong return ratios. The firm projects a return on assets of 1.7% and a return on equity of 14% by FY27. 'It is among our sector top picks,' the report concludes, placing HDFC Bank alongside other prominent private lenders.