HDFC Bank Stock Price: If you are looking for a strong stock to invest in the banking sector, then keep an eye on HDFC Bank. The stock of the largest bank in the private banking sector is expected to see strong growth in the future. Brokerage house BNP Pariba has given an outperform rating to HDFC Bank shares and has given a target price of Rs 2550. This is 45 percent more than the current price of Rs 1760. The brokerage house has also given some major reasons behind the rise in the stock. The bank's stock has remained almost flat this year. Whereas in 1 year it has increased by 16 percent.

Rate cut is positive for banks 

Most see rate cuts as a pressure on bank margins. For private banks with coverage, the margin impact of rate cuts is not very high, brokerages say. Second, an easier cycle comes with the benefit of FD repricing, increased CASA momentum or potential loan mix changes. HDFC Bank in particular has the additional tailwind of higher cost NCDs and FD expiries, which it inherited from its parent entity in its margin journey.

CASA : Profitability Drivers 

The brokerage says the bank's NIM is projected to reach 4% by 4QFY26, even without building in potential operating leverage benefits, while we expect RoA/RoE to reach 1.9%/16%. Despite the lasso base, our CASA growth estimate is 13.4% during FY24-27, which indicates very low system growth given HDFC Bank's incremental market share gain performance.

HDFC Bank Top Picks

The brokerage house termed HDFC Bank as its top pick in the banking sector and said that our estimates of key fundamentals, including ROA and ROE, assume an accelerated timeline for PSL asset build up, muted CASA momentum and no expected savings in operating costs from merger synergies to create a margin of safety. Despite these conservative assumptions, the brokerage estimates ROA to touch 1.9% in FY26 and ROE may remain close to the pre-merger level of 17% by FY27.

Big victory for the bank on CASA issue 

According to the brokerage, the valuation of 2.1x 1-year forward core BVPS (large discount to long term average) does not do justice to the FY26E core ROE of 16.2%, which compares favourably with its pre-merger last 5 year average. A positive surprise on CASA compared to base exemption pushes forward ROE by 1.7 times the rate of negative surprise. This is due to the greater elasticity of loan growth for CASA acceleration compared to deceleration. In other words, on the issue of CASA, the bank has won big.