Shares of HDFC Bank were tanking on Monday after the lender received a downgrade from a major international brokerage.

What Happened: Global brokerage firm CLSA recently downgraded HDFC Bank’s stock rating from “buy” to “outperform” and revised its target price to ₹1,650 per share, down from ₹2,050. This move follows concerns raised by analysts regarding the bank’s sluggish deposit growth and margin recovery.

Despite being India’s largest private sector lender, HDFC Bank has witnessed a significant decline of over 15% in its stock value since the beginning of the year, contrasting sharply with the Bank Nifty index’s marginal 0.9% decrease.

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CLSA analysts highlighted twin challenges for HDFC Bank in the realm of deposits, citing a high ask rate and a challenging environment. They anticipate a more gradual recovery in net interest margin (NIM), projecting a “U-shaped” trajectory rather than a rapid “V-shaped” rebound.

Counter Arguments: In contrast, HSBC analysts expressed confidence in HDFC Bank’s growth potential, issuing a “buy” recommendation with a target price of ₹1,750 per share. They foresee the stock offering returns between 15-29% compounded annual growth rate over FY24-27.

Additionally, Citi analysts maintained a bullish outlook on HDFC Bank, assigning a “buy” rating and a target price of ₹2,050 per share. They emphasised the bank’s robust and sustainable franchise, which is poised to drive profitable growth in the future.

Price Action: HDFC Bank’s share price was down 0.9% at ₹1,433.05 in the morning session of trade on Monday.

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