HDFC Bank share price target: 40% upside? Why is the bank Ambit Capital's top banking pick
HDFC Bank has underperformed many of its peers over the past year, with major stock pressure in H2FY26. Stretched LDRs are among the most highlighted reasons, Ambit Capital said.
- Apr 6, 2026,
- Updated Apr 6, 2026 3:52 PM IST
Ambit Capital on Monday said HDFC Bank Ltd is its top banking pick. ICICI Bank Ltd, Axis Bank Ltd and State Bank of India (SBI) are its next three picks in the same pecking order. The domestic brokerage maintained strategic preference for large private bank over PSU bank as it believes the latter’s recent valuation surge is decoupled from stagnant return ratio and weak core profitability.
Ambit Capital said said HDFC Bank has underperformed many of its peers over the past year, with major stock pressure in H2FY26. Stretched loan-to-deposit ratio (LDR) are among the most highlighted reasons for this underperformance, which was contrary to expectations of a softening ratio, it said.
"They raised uncertainty regarding the bank’s ability to augment deposits and continue to participate in credit growth. However, we believe that the LDR crisis is overstated for the bank as discussed below," the brokerage said.
Ambit Capital said HDFC Bank has consistently gained deposit market share in the past. Even post-merger, the bank continued to demonstrate proficiency in deposit augmentation, registering mid-teens deposit growth in the past quarters.
"Though the pace stabilised in 2QFY26/3QFY26 to 12 per cent, it remains driven by adequate liquidity. We believe HDFC Bank growth momentum can pick up again, driving 15 per cent deposit growth over FY27-28E," it said.
The brokerage revised its target for HDFC Bank lower to Rs 1,050 from Rs 1,150, which still suggests 40 per cent potential upside. On Monday, the scrip rose 2.68 per cent to settle at Rs 771.20 on BSE.
Ambit Capital suggested a target of Rs 1,550 on ICICI Bank, Rs 1,400 on Axis Bank, Rs 1,150 on SBI, suggesting 13-27 per cent potential upsides.
"Given geopolitical volatility and recent supply shocks, we moderate credit growth estimates by 0.5-1.5 oer cent for FY26-28 and cut our earnings CAGR to 15.7 per cent (vs 17.3 per cent earlier). We believe the recent price correction reflects a possible demand shock and the near-term impact on earnings. Though the macro uncertainty can weigh over valuation multiples in the near term, longer-term fundamentals for banks are resilient," it said.
Ambit Capital cited HDFC Bank's superior deposit augmenting capabilities and said it remained confident of its ability to manage profitable growth.
"We like regional banks FB>KVB given sticky liability franchise and Ujjivan>AU>Equitas among SFBs to play the MFI revival. Increasing geopolitical uncertainty, followed by adverse policy action by the regulator, are key risks to our investment thesis," it said.
Ambit Capital said SBI remained its top pick among PSU banks, despite limited return on asset (RoA) expansion room. Ambit maintained 'Sell' on Kotak Mahindra Bank Ltd (KMB), Bandhan Bank, and RBL Bank Ltd due to suboptimal capital allocation and structural transition risks. It favoured regional banks such as Federal Bank and Karur Vysya Bank and Ujjivan Small Finance Bank Ltd among SFBs as it captures secured growth and MFI recovery trends.
"The current Indian banking landscape is grappling with a valuation discount as persistent macroeconomic uncertainty forces a recalibration of risk premiums. While systemic credit growth remains structurally sound, heightened geopolitical volatility and a tightening liquidity environment have introduced significant earning visibility risks," Ambit Capital said.
It said valuation multiples are transitioning from peak expansion to defensive consolidation, adding that until global supply chain disruptions and domestic liquidity constraints stabilise, price to book value multiples will remain range-bound, reflecting a cautious institutional stance toward cyclical volatility.
From a longer-term perspective, banks at currently lower valuations offer a good opportunity to buy, as balance sheet strength and the long-term fundamentals of banks are healthy, the domestic brokerage said.
Ambit Capital on Monday said HDFC Bank Ltd is its top banking pick. ICICI Bank Ltd, Axis Bank Ltd and State Bank of India (SBI) are its next three picks in the same pecking order. The domestic brokerage maintained strategic preference for large private bank over PSU bank as it believes the latter’s recent valuation surge is decoupled from stagnant return ratio and weak core profitability.
Ambit Capital said said HDFC Bank has underperformed many of its peers over the past year, with major stock pressure in H2FY26. Stretched loan-to-deposit ratio (LDR) are among the most highlighted reasons for this underperformance, which was contrary to expectations of a softening ratio, it said.
"They raised uncertainty regarding the bank’s ability to augment deposits and continue to participate in credit growth. However, we believe that the LDR crisis is overstated for the bank as discussed below," the brokerage said.
Ambit Capital said HDFC Bank has consistently gained deposit market share in the past. Even post-merger, the bank continued to demonstrate proficiency in deposit augmentation, registering mid-teens deposit growth in the past quarters.
"Though the pace stabilised in 2QFY26/3QFY26 to 12 per cent, it remains driven by adequate liquidity. We believe HDFC Bank growth momentum can pick up again, driving 15 per cent deposit growth over FY27-28E," it said.
The brokerage revised its target for HDFC Bank lower to Rs 1,050 from Rs 1,150, which still suggests 40 per cent potential upside. On Monday, the scrip rose 2.68 per cent to settle at Rs 771.20 on BSE.
Ambit Capital suggested a target of Rs 1,550 on ICICI Bank, Rs 1,400 on Axis Bank, Rs 1,150 on SBI, suggesting 13-27 per cent potential upsides.
"Given geopolitical volatility and recent supply shocks, we moderate credit growth estimates by 0.5-1.5 oer cent for FY26-28 and cut our earnings CAGR to 15.7 per cent (vs 17.3 per cent earlier). We believe the recent price correction reflects a possible demand shock and the near-term impact on earnings. Though the macro uncertainty can weigh over valuation multiples in the near term, longer-term fundamentals for banks are resilient," it said.
Ambit Capital cited HDFC Bank's superior deposit augmenting capabilities and said it remained confident of its ability to manage profitable growth.
"We like regional banks FB>KVB given sticky liability franchise and Ujjivan>AU>Equitas among SFBs to play the MFI revival. Increasing geopolitical uncertainty, followed by adverse policy action by the regulator, are key risks to our investment thesis," it said.
Ambit Capital said SBI remained its top pick among PSU banks, despite limited return on asset (RoA) expansion room. Ambit maintained 'Sell' on Kotak Mahindra Bank Ltd (KMB), Bandhan Bank, and RBL Bank Ltd due to suboptimal capital allocation and structural transition risks. It favoured regional banks such as Federal Bank and Karur Vysya Bank and Ujjivan Small Finance Bank Ltd among SFBs as it captures secured growth and MFI recovery trends.
"The current Indian banking landscape is grappling with a valuation discount as persistent macroeconomic uncertainty forces a recalibration of risk premiums. While systemic credit growth remains structurally sound, heightened geopolitical volatility and a tightening liquidity environment have introduced significant earning visibility risks," Ambit Capital said.
It said valuation multiples are transitioning from peak expansion to defensive consolidation, adding that until global supply chain disruptions and domestic liquidity constraints stabilise, price to book value multiples will remain range-bound, reflecting a cautious institutional stance toward cyclical volatility.
From a longer-term perspective, banks at currently lower valuations offer a good opportunity to buy, as balance sheet strength and the long-term fundamentals of banks are healthy, the domestic brokerage said.