HDFC Bank shares fall 2% to fresh 52-week low, tumble 30% in 10 months. What lies ahead?

HDFC Bank shares dropped 2% on Thursday to a fresh 52-week low of Rs 710, marking a decline of over 30% from its 52-week high of Rs 1,020.50 hit in October 2023. The bank's market capitalisation slipped below Rs 11 lakh crore. The latest selloff was triggered by a securities fraud class-action lawsuit filed by an investor, Jwalant Natvarlal Soneji, in the US District Court for the Southern District of New York, alleging that the lender made false and misleading statements. HDFC Bank has stated that it believes the lawsuit is without merit and intends to vigorously defend itself.

This lawsuit adds to a series of concerns weighing on the stock. In March, former part-time Chairman Atanu Chakraborty resigned citing a mismatch between the bank's practices and his personal values, causing the stock to lose 12% in three days and wiping off approximately Rs 1.6 lakh crore in market value. An earlier strong Q1 business update had sparked a recovery, but those gains were erased after the actual quarterly results were released. Additionally, a group of investors who purchased Carlisle's life settlement product through HDFC Bank's Dubai operations are planning to approach the Prime Minister's Office, alleging mis-selling and denial of redemption.

On the analyst front, Christopher Wood of Jefferies removed HDFC Bank from his India long-only model portfolio, replacing it with MCX and Lenskart Solutions. However, Goldman Sachs initiated coverage with a 'Buy' call and a target price of Rs 861, citing margin-driven core-PPOP inflection and attractive valuations, while Nomura and Motilal Oswal also maintained 'Buy' calls. From a technical perspective, SBI Securities' Sudeep Shah noted the stock has broken below the Rs 725-720 support zone, with RSI approaching 30 indicating bearish momentum. The next crucial support is at Rs 685-680, and the stock is expected to remain bearish unless it trades above Rs 765-770. The stock has a current P/E ratio of 14x and has delivered negative returns of 9% over three years and 8% over five years.

(Source：The Economic Times)