HDFC Bank’s Stock Hits the Accelerator—Investors Buckle Up for Q4

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HDFC Bank, the country's largest private sector bank, has seen its share price touch a fresh new all-time high just a few days ahead of the announcement of its Q4 FY25 results. The stock's up move is a sign of increasing optimism in the minds of investors, which is fueled by strong growth in deposits, strategic use of interest rates, and favorable market mood.

Record-Breaking Rally

The stock price of HDFC Bank's hit an all-time high at ₹1,885 on BSE during Wednesday's intra-day trade, leaving behind its prior peak of ₹1,880 in December 2024.
The stock jumped 7% in the last three trading sessions, much faster than the benchmark market.

High Deposit and Advances Growth

Q4 FY25 end deposits registered at ₹27.14 trillion, a growth of 14.1% year-on-year and the biggest quarterly rise during FY25.
Gross advances expanded by 5.4% year-on-year to ₹26.43 trillion, reflecting the bank's relentless loan growth momentum.

Strategic Interest Rate Adjustments

HDFC Bank recently cut the interest rate on savings accounts by 25 basis points to 2.75% for balances up to ₹50 lakh, the lowest among key private sector banks.
The cut is to enhance net interest margins and overall profitability, in line with the bank's emphasis on sustainable growth.

Market Capitalization and Analyst Sentiment

The market capitalization of the bank has jumped to about ₹14.3 trillion, rising by about ₹38,000 crore in value during the latest rally.
Experts are also optimistic, with 31 out of 37 rating the stock as a 'Strong Buy' and having a median target price of ₹1,984.98, indicating room for further upside.

Operational Strengths and Outlook

HDFC Bank continues to be a market leader in auto loans, personal loans, and cash management, underpinned by high brand equity, professional management, and a high CASA ratio.
Asset quality of the bank continues to be strong, with expectations of stable return ratios (RoA/RoE) of 1.8-1.9% and 14-15% respectively for FY25-27.
Investors are eagerly looking forward to the announcement of Q4 results on April 19, 2025, which is likely to give clearer insight into the financial path and strategic plans of the bank.

What's Behind the Rally?

Deposit Mobilization: Aggressive deposit growth efforts, particularly term deposits, have improved the bank's funding platform.
Interest Rate Strategy: Reduction of savings rates is likely to drive margins and profitability.
Positive Market Sentiment: Optimistic analyst expectations and rising passive fund flows as a result of FPI holding changes have elevated investor sentiment.
Expectation of Robust Q4 Performance: The coming earnings announcement is expected to validate the bank's operational robustness and growth potential.

Sources: Business Standard, Economic Times, Republic World

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