HDFC Bank share price drops for third straight session after Q1FY27 results: Should you buy on dip or avoid?

HDFC Bank share price: Shares of HDFC Bank extended their sharp decline for a third straight session on Wednesday, July 22, after India's largest private sector lender reported its first quarter earnings (Q1FY27).

Just in today's deals, the private sector lender fell 1.2% to ₹752.45 per share on BSE. Meanwhile, it has shed over 8% in 3 sessions. It lost 2% in the previous session, July 21, and over 5% on Monday, July 20.

India's largest private lender, HDFC Bank Ltd., has been grappling with particularly difficult times in 2026. The stock has cracked over 24% year-to-date, marking its worst start since 2008, when it had slumped 42%.

The sharp decline came on the back of a host of headwinds. Even as the bank posted resilient earnings in the first quarter of FY27. Besides the operational challenges, HDFC Bank has also faced key governance issues in 2026, including the delay in the reappointment of CEO Sashidhar Jagdishan, along with the abrupt exit of part-time Chairman Atanu Chakraborty.

Margins have remained range-bound in the last few quarters. The bank's net interest margin declined to 3.26% from 3.38% sequentially in the quarter ended June 30, 2026.

HDFC Bank Q1 Results

HDFC Bank posted a standalone net profit of ₹19,060 crore for the April-June quarter of FY27, marking a 5% year-on-year (YoY) increase from ₹18,155 crore reported in the same quarter of the previous financial year.

HDFC Bank's net interest income (NII), or the difference between interest earned and interest paid, increased 7% year-on-year to ₹33,534 crore in the first quarter of FY27, compared with ₹31,438 crore in the corresponding quarter of the previous fiscal.

During the quarter, the bank's gross non-performing assets (NPAs) declined over 3% year-on-year to ₹35,846 crore, while net NPAs edged up marginally to ₹12,357 crore. Gross non-performing assets (GNPAs) stood at 1.17% of gross advances as of June 30, 2026, compared with 1.15% three months earlier and 1.40% a year ago. Net non-performing assets (NNPAs) were at 0.41%.

The lender reported a net interest margin (NIM) of 3.26% on total assets and 3.40% on interest-earning assets. Meanwhile, its total balance sheet expanded to ₹43.97 lakh crore as of June 30, 2026, from ₹39.54 lakh crore a year earlier.

Should you buy?

Despite HDFC Bank's sharp decline following its June quarter earnings, brokerages remain constructive on the country's largest private sector lender, citing its strong balance sheet, improving business mix and long-term earnings potential. While analysts acknowledged near-term pressure on net interest margins (NIMs), most believe the stock offers an attractive long-term investment opportunity with gradual improvement in profitability over the coming years.

According to Seema Srivastava, Senior Research Analyst at SMC Global Securities, HDFC Bank remains a preferred pick for long-term investors despite the recent weakness in its share price.

"For long-term investors, the private lender is the defensive compounder. It offers predictability, best-in-class underwriting, and a dominant retail franchise, though RoE expansion will hinge on merger synergies and CASA recovery. It fits as a core portfolio holding for stability and compounding."

Srivastava added that investors should view HDFC Bank as a long-term wealth creator rather than a short-term trading opportunity.

MOFSL reiterated its 'Buy' rating on HDFC Bank, saying the lender delivered a largely in-line June quarter performance, supported by healthy business growth and lower provisions, although NIM remained the key miss, contracting 12 basis points QoQ.

The brokerage noted that loan growth was driven by the SME and corporate segments, while retail loan growth remained relatively modest. Deposit growth remained healthy at 14.7% YoY and 2.1% QoQ, helping the credit-deposit ratio inch up to 95.8%.

"We expect the credit-deposit ratio to gradually moderate to 92-93% by FY28E through calibrated balance sheet management. The bank continues to maintain contingency and floating provisions of ₹156 billion and ₹214 billion, respectively."

MOFSL expects improving operating leverage to support a gradual recovery in profitability and return ratios over the coming years. While it has trimmed its FY27 and FY28 earnings estimates by 2% each, the brokerage has maintained its 'Buy' rating with a target price of ₹1,050. It expects HDFC Bank to deliver a RoA of 1.84% and a RoE of 14.7% in FY28, valuing the standalone bank at 2.1x its estimated FY28 adjusted book value.

Kotak Securities also maintained its 'Buy' rating with a target price of ₹1,050, saying downside risks appear limited despite the absence of near-term triggers. The brokerage noted that weak NIM performance led to muted earnings growth, while the ongoing balance sheet transformation has yet to fully translate into stronger profitability. It added that HDFC Bank's focus on loan growth in a tight deposit environment continues to delay margin expansion, although it expects NIM recovery to remain gradual as funding conditions improve.

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.