HDFC Bank Shares Fall Second Day After Q1 Results; Analysts Split

Fresh Sell-Off in HDFC Bank

HDFC Bank shares continued their slide on Tuesday, falling over 5% in early trade after the lender's June quarter results failed to impress the street. The stock has now dropped for two consecutive sessions, wiping out gains from the past month.

The decline comes even as the bank reported a healthy 20% year-on-year rise in net profit. However, a slight compression in net interest margins and a cautious commentary on deposit growth spooked investors. Analysts on Dalal Street are now sharply divided on the path ahead for the stock.

Mixed Views from Brokerages

Several brokerages have cut their target prices for HDFC Bank, while others see the recent fall as a buying opportunity. The core concern remains margin pressure as the bank continues to navigate a high-cost deposit environment. A section of analysts believes the margin squeeze is temporary and will ease as the bank recalibrates its loan book.

On the positive side, HDFC Bank's loan growth outlook appears bright. The management indicated that demand across retail and corporate segments remains robust. This has led some analysts to maintain a 'buy' rating, arguing that the current valuation offers a good entry point for long-term investors.

Private Banking Stocks Under Pressure

The broader private banking space also took a hit on Tuesday. Shares of Axis Bank, Kotak Mahindra Bank, and ICICI Bank fell between 2% and 4%. The sell-off was triggered by a combination of weak Q1 results from some peers and profit-booking after a strong rally in the sector over the past few weeks.

Market participants are now closely watching the next set of earnings from the sector. The commentary on asset quality and loan growth will be key in determining whether the current correction is a blip or the start of a larger trend.

What Should Investors Do?

For existing shareholders, the decision to hold or sell depends on individual risk appetite. Those with a long-term horizon may choose to hold, given the bank's strong franchise and recovery in loan growth. Short-term traders, however, are advised to be cautious as volatility could persist until the next round of earnings and management guidance.

Analysts recommend waiting for more clarity on margin trajectory before adding fresh positions. The next few trading sessions will be crucial as the stock tests key support levels around the 52-week moving average.

Investors will now watch for any regulatory updates and the bank's strategy to manage deposit costs in the coming quarters.