India’s largest private sector lender, HDFC Bank, continued its upward run as the stock remained higher for the fourth straight session on Friday, October 17, gaining 1.47% to ₹1,009 and inching closer to its record high of ₹1,018.85, touched in July.
The rally comes ahead of the bank’s September quarter results, scheduled for release tomorrow, October 18. The Street expects a muted performance, but any surprise on the margins front, which analysts anticipate, could propel the stock to remain higher and may boost the overall market sentiment.
“Strong results from banking majors such as HDFC Bank and ICICI Bank can provide fundamental support to the market. If Reliance Industries, which has been a laggard for some time, also joins the rally, the market could sustain momentum for longer. Muhurat trading and festive cheer may further add to the bullish sentiment,” said Dr. VK Vijayakumar, Chief Investment Strategist, Geojit Investments Limited.
Meanwhile, the rally in the lender not only rewarded its shareholders but also supported the Nifty Bank index, which reached a fresh record high of 57,830 points in today’s session, taking its month-to-date returns to 5.4%. The gains also lifted the Nifty 50, which scaled to its highest level since October 2024 and is now just 2% away from its record high.
HDFC Bank Q2 earnings preview
Brokerage firm Emkay Global expects HDFC Bank to post stronger loan growth and a smaller margin contraction compared to Q1FY26, with credit costs likely supporting overall earnings. It added that slippages may decline, driven by a reduction in agri-related non-performing assets.
The brokerage projects the bank’s Q2 net interest income (NII) to increase about 5% year-on-year and 0.4% quarter-on-quarter to ₹31,561.1 crore, with the net interest margin (NIM) estimated at 3.4%, reflecting a decline of 22 basis points year-on-year and 7 basis points sequentially.
Motilal Oswal expects HDFC Bank’s cost ratios to remain under control, with asset quality likely to stay stable. The brokerage anticipates some moderation in margins and expects the credit-deposit (CD) ratio to reduce, noting that guidance for credit growth will be a key monitorable for the bank in the upcoming quarter.
The Reserve Bank of India has lowered interest rates by 100 basis points this year to revive consumption and investment amid a slowing economy. Rate cuts tend to squeeze banks’ margins in the short term, as lenders reduce loan rates faster than deposit rates.
Analysts expect a recovery from the second half of FY26, driven by stronger consumption, government tax relief, and faster growth in unsecured credit. Emkay expects NII to see a 2.3% YoY decline, operating profit to improve 2.8% YoY to 28.9%, and net profit to fall 0.5% YoY and 7.8% QoQ.
Should you buy the stock ahead of Q2 results?
Abhinav Tiwari, Research Analyst at Bonanza, notes that HDFC Bank’s stock, currently near its lifetime high of around ₹980, reflects robust fundamentals supported by consistent deposit growth and stable asset quality. Total deposits and advances have increased by 15% and 9% YoY, indicating a cautious yet balanced expansion strategy. Margin pressure remains a near-term concern, with NIMs expected to moderate to around 3.10% due to repo rate transmission and deposit repricing lag.
He further added that the bank’s asset quality remains strong, with GNPA and NNPA projected at 1.40% and 0.50%, reflecting only a marginal YoY uptick of 7 bps and 4 bps, reaffirming prudent underwriting standards. While cross-sell synergies from the HDFC merger are yet to be fully realized, gradual technology integration is expected to enhance profitability over the medium term.
He also highlighted that at a TTM P/B of around 2.9x and ROA of 1.93%, HDFC Bank’s valuation appears reasonable given its long-term growth potential. Fundamentally, it remains a solid long-term holding, supported by a stable deposit base, prudent risk management, and consistent ROE of approximately 14%.
“However, considering near-term margin compression and ongoing merger integration, investors may prefer to await Q2 FY26 results before initiating fresh positions, especially with the stock trading close to its lifetime highs,” said Abhinav Tiwari.
Disclaimer: This story is for educational purposes only. The views and recommendations made above are those of individual analysts or broking companies, and not of Mint. We advise investors to check with certified experts before making any investment decisions.
