HDFC Bank Drops to 3 Month Low Reflects Investor Caution After Q3 Business Update
Shares of HDFC Bank slipped to a three-month low on January 6, extending losses for the second straight session after the lender released its Q3 business update. The stock declined more than 2 percent during intraday trade, emerging as one of the top laggards on the benchmark indices Sensex and Nifty.
At its lowest point, HDFC Bank shares traded near ₹956 apiece, a level not seen in over three months. The market reaction suggested that while headline growth numbers remained steady, investors were wary of the underlying deposit trends and their implications for future loan growth.
Market participants noted that the selling pressure reflected short-term concerns rather than a sharp deterioration in fundamentals, but the timing of the update prompted profit-booking in an already cautious market environment.
Q3 Performance Shows Steady Advances Growth But Mixed Signals on Deposits
In its Q3 FY26 business update released on January 5, HDFC Bank reported a 9 percent year-on-year increase in average advances under management, which stood at ₹28.64 lakh crore compared with ₹26.28 lakh crore in the same quarter last year.
Key highlights from the update include:
-
Average advances under management rising 9 percent year-on-year
-
Period-end advances under management increasing 9.8 percent to ₹29.46 lakh crore
-
Gross advances growing 11.9 percent year-on-year to ₹25.43 lakh crore
-
Average deposits increasing 12.2 percent to ₹27.52 lakh crore
-
CASA deposits rising 9.9 percent year-on-year to ₹8.18 lakh crore
While advances growth remained healthy, analysts pointed out that deposit growth, especially in the low-cost CASA segment, lagged the pace required to comfortably support faster credit expansion.
Also Read : India’s Oil Import Strategy To Remain Unchanged Despite US Action In Venezuela, Official Says
High Credit-Deposit Ratio Emerges as a Key Overhang for the Stock
One of the primary concerns highlighted by brokerages was the bank’s elevated credit-deposit (CD) ratio, which measures loans given as a proportion of deposits. During the quarter, the CD ratio reportedly moved close to 100 percent, indicating tight liquidity conditions.
Analysts at Nomura flagged this as a limiting factor for near-term loan growth. According to Nomura, “slower deposit growth limited the increase in lending this quarter, as the CD ratio has moved close to peak levels.”
The brokerage added that HDFC Bank would require strong and sustained deposit inflows to meaningfully accelerate loan growth in the coming quarters, particularly in a competitive banking environment where deposit mobilisation remains challenging.
Brokerages Maintain Long-Term Confidence Despite Near-Term Headwinds
Despite the cautious near-term outlook, brokerages stopped short of turning negative on the stock. Motilal Oswal Financial Services maintained its ‘Buy’ rating on HDFC Bank, citing the lender’s strong franchise, diversified loan book, and healthy advances momentum.
Motilal Oswal noted that:
-
Advances growth continues to remain resilient
-
Asset quality trends are stable
-
The bank is well-positioned to benefit once deposit growth normalises
Analysts believe that while deposit pressures may cap near-term upside, HDFC Bank’s scale, brand strength, and distribution network provide a solid foundation for medium- to long-term growth.
Stock Performance Highlights Short-Term Volatility Amid Long-Term Gains
HDFC Bank’s recent decline has weighed on short-term returns, but the longer-term performance remains relatively strong. Over the past five trading sessions, the stock has fallen around 3 percent, while it is down over 4 percent in the last one month.
However, on a longer horizon, the picture looks more balanced. HDFC Bank shares are up over 12.5 percent in the past one year and have delivered gains of more than 34 percent over the last five years, underlining the lender’s consistent wealth creation track record.
Market experts suggest that the current correction could keep the stock range-bound in the near term as investors await clearer signs of deposit traction.
What Investors Should Watch Going Forward
Going ahead, analysts believe that the key monitorables for HDFC Bank will include:
-
Improvement in deposit growth, particularly CASA deposits
-
Movement in the credit-deposit ratio
-
Ability to sustain advances growth without compromising margins
-
Broader liquidity conditions in the banking system
As one analyst put it, “HDFC Bank’s growth engine remains intact, but deposits will be the swing factor that determines how fast the bank can scale its loan book from here.”
For long-term investors, the recent correction underscores the importance of tracking operating metrics beyond headline growth, as market sentiment remains closely tied to liquidity and funding dynamics.
