HDB Financial shares plunge 16% in three days; what should investors do?

JM Financial said, "HDB reported a weak quarter with asset quality slipping despite improving disbursement momentum. PAT was 2 per cent below JMFe (JM Financial's estimate) as lower opex (-2 per cent JMFe) failed to offset weaker noninterest income (-6 per cent JMFe). PAT grew 34 per cent YoY but declined 1 per cent QoQ, with RoA/RoE moderating to 2.4 per cent/14.3 per cent (2.5 per cent/14.9 per cent in Q1 FY27)."

The brokerage added, "NII rose 16 per cent/1 per cent YoY/QoQ (in line with JMFe) as calculated NIM contracted 12 bps QoQ. Disbursement growth improved to 19 per cent YoY (16 per cent in Q1 FY27) aided by a sharp uptick in enterprise lending, while AUM growth remained muted at 12 per cent YoY."

JM Financial also said, "Asset quality deteriorated, with net slippages (annualised) rising to 2.4 per cent (1.8 per cent in Q1 FY27)."

It further stated, "We cut FY27–28E EPS by 3–8 per cent and value the stock at 2x FY28E BVPS (earlier 2.5x), factoring in RoA/RoE of ~2.5 per cent/15 per cent over FY27–29E. Maintain ADD with a revised TP (target price) of Rs 650 (earlier Rs 820)."

Nuvama Institutional Equities also cut its target price on HDB Financial, citing the softer Q2 FY27 performance and near-term margin and asset-quality pressures.

"Given the softer Q2FY27 performance and near-term margin and asset quality pressures, we reduce TP to Rs 675 from Rs 700, valuing the stock at 1.8x Sep'28E BV (1.6x at CMP). Retain 'HOLD'," Nuvama stated.

Meanwhile, Ravi Singh, Chief Research Officer at Master Capital Services, noted, "HDB Financial is trading at a price-to-book (P/B) ratio of 1.95x, below its five-year median of 2.9x. However, weak price performance and record-low levels remain concerns. Investors should avoid fresh positions until the stock shows clear signs of recovery."

Kranthi Bathini, Director of Equity Strategy at WealthMills Securities, said, "Existing investors may continue to hold their positions, while fresh buying should be considered only after a clear recovery emerges."

Virat Jagad, Senior Technical Research Analyst at Bonanza, stated the stock has breached a major support level, forming a sharp bearish candle amid heavy selling pressure. It is also trading well below all major EMAs, indicating continued weakness. "The overall trend remains strongly bearish. No fresh buying or holding recommendation. Existing holders can consider exiting as major support is already broken," he suggested.