HDFC Bank shares jump 3% in 2 days after Q1 results. 5 reasons behind the move

Time of India

6 days ago

HDFC Bank shares
are witnessing strong investor interest after a strong Q1FY26 earnings, coupled with its maiden
bonus issue
and special dividend announcement. Shares of India's largest private bank have jumped 3% over the last 2 trading sessions.
The bank's performance, supported by healthy
loan growth
, stable asset quality, and upbeat commentary from brokerages, has reinforced its position as a top pick in the banking sector.
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Despite concerns over net interest margin (NIM) pressures and macroeconomic challenges, multiple global and domestic brokerages have reiterated their positive outlook on HDFC Bank, citing its strong balance sheet, improving credit demand, and expected benefits from merger synergies.
Here's a breakdown of key reasons why the stock is gaining momentum:
Strong Q1 results with 12% net profit growth
HDFC Bank
reported a 12% year-on-year rise in net profit to Rs 18,155 crore for the June quarter. Net interest income (NII) rose 5.4% YoY to Rs 31,440 crore. The bank's net interest margin moderated slightly to 3.35% from 3.46% in the previous quarter, but the moderation was in line with street expectations.
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Brokerages like Nomura and Goldman Sachs expect NIM pressures to ease going forward. Goldman noted that 'pick up in loan growth should drive improvement in operating leverage', while Nomura pointed out that the bank created floating provisions of Rs 90 billion and contingent provisions of Rs 17 billion during the quarter, strengthening its buffer position.
Maiden bonus issue, dividend announcement
HDFC Bank announced its first-ever bonus issue in a 1:1 ratio, sparking strong retail investor interest. Each shareholder will receive one bonus share for every existing fully paid-up share held. The record date for the bonus issue entitlement is August 27, 2025.
Additionally, the board approved a special interim dividend of Rs 5 per share, with the record date set as July 25 and payouts scheduled for August 11. These corporate actions further buoyed investor sentiment.
Improving credit growth outlook
Loan growth is expected to pick up in the second half of FY26, driven by strong demand in retail, SME, and housing segments, supported by festive demand and favourable policy measures. Jefferies reported that 'management expects retail credit demand to improve, aided by benefits from cut in tax rates, interest rates as well as regulatory easing.'
According to Motilal Oswal, which reiterated its 'Buy' rating on the stock, the June quarter was steady, with the bank deploying HDB gains to lift floating and contingent provisions. The brokerage expects FY27E return on assets (RoA) and return on equity (RoE) at 1.9% and 14.9% respectively.
Multiple brokerages raise target prices
Brokerages across the board raised their target prices for HDFC Bank post Q1 results. Jefferies increased its price target to Rs 2,400 from Rs 2,340, while Goldman Sachs now values the stock at Rs 2,327. CLSA and Motilal Oswal pegged their target at Rs 2,300, and Nomura raised its valuation to Rs 2,190.
CLSA maintained its 'Outperform' rating, noting only an 11 basis point moderation in core NIMs, which was better than expectations. It also praised the bank's 'strong quarterly average deposit growth (both CASA and total)' and 'flat opex QoQ—another positive from the results.'
Steady fundamentals backed by merger synergies
Brokerages are of the view that HDFC Bank's underlying fundamentals remain strong. The bank is well-positioned to deliver stronger growth in the second half of FY26, aided by improving loan demand, easing regulatory constraints, and monetisation of merger synergies. Analysts believe that the bank's focus on deposit growth, reduced credit-deposit ratio, and provision buffers further solidify its long-term investment case.
With multiple catalysts, including its maiden bonus issue, special dividend, healthy Q1FY26 results, positive credit growth outlook, and brokerages raising target prices, HDFC Bank shares are attracting sustained investor interest.
Also read:
Why are short-term investors favoring ICICI Bank over HDFC Bank?
Analysts continue to back the lender as a top sector pick, expecting operational metrics to improve over the coming quarters.
(
Disclaimer
: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of The Economic Times)