HDFC Bank share price crashes over 8% to 52-week low as part-time chairman steps down: Is it still a buy?

Shares of HDFC Bank saw a major selloff, plunging over 8% to a 52-week low of ₹772 on Thursday, March 19, after an unexpected leadership change raised concerns about governance and internal practices at the country’s largest private-sector lender.

The bank announced that its part-time Chairman and independent director, Atanu Chakraborty, has stepped down from his role. In the interim, Keki Mistry has been appointed as part-time Chairman for a period of three months, with the approval of the Reserve Bank of India.

Investor sentiment appeared to weaken following the development. HDFC Bank’s American Depositary Receipts (ADRs) fell sharply, more than 7% overnight, to $26.62.

The banking stock has already been under pressure in recent months. HDFC Bank shares have declined 8% over the past month and 13% over the past six months. On a year-to-date basis, it has fallen around 15%, reflecting persistent selling pressure.

However, the lender later pared some losses, trading 5% lower at ₹801.70 at 10:10 am as the bank clarified that while the resignation letter of Atanu Chakraborty was dated March 17, it was received by the bank on March 18.

Further, the bank, in a conference call earlier today, clarified that there is no power tussle and that Chakraborty's resignation has nothing to do with the operational profitability of the bank.

Exit flags concerns over internal practices

Chakraborty’s resignation has drawn attention due to the reasons cited in his letter, where he pointed to concerns around certain developments within the bank during his tenure.

In his resignation note, he said that certain happenings at the bank did not align with his personal values and ethics.

“Certain happenings and practices within the bank, that I have observed over the last two years, are not in congruence with my personal Values and Ethics. This is the basis of my aforementioned decision,” he wrote.

He clarified that there were no additional material reasons behind his decision beyond the concerns highlighted.

Reflecting on his tenure, Chakraborty noted that the bank underwent a significant transformation, including the landmark $40 billion merger with Housing Development Finance Corporation (HDFC), which created a financial services conglomerate and elevated the bank’s position in the Indian banking landscape. The merger positioned HDFC Bank as the second-largest lender in India, marking a pivotal moment in its growth trajectory.

He added that while the merger was a major strategic milestone, “though the benefits of the merger are yet to fully fructify.”

Chakraborty joined the bank’s board in May 2021 and brought with him extensive experience in public policy and finance. A Gujarat cadre IAS officer, he previously served as Secretary in the Ministry of Finance, was an alternate governor on the World Bank Board, and also chaired the National Infrastructure Investment Fund.

Is HDFC Bank stock still a buy? - Key levels to watch

HDFC Bank’s sharp underperformance relative to benchmark indices has raised fresh concerns among market participants, with technical indicators pointing to a possible extension of the downtrend.

While the recent breakdown below key support levels has weakened near-term sentiment, analysts believe any recovery may be short-lived unless the stock decisively reclaims crucial resistance levels.

According to Anand James, Chief Market Strategist, Geojit Investments Limited, “By breaking below Monday’s low, HDFC Bank has clearly stretched much beyond benchmark indices, which have largely held above their respective lows of Monday. While this gives hopes of a mean reversion swing higher, we are concerned that the slippage past Jan 2025’s low of 810 is suggestive of a further range expansion, favouring more downside. Projected objective is at 748, which would be invalidated by only a close back above 810.”

Disclaimer: 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.