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HDFC Bank share price slumped another 2% in intraday deals on Friday, March 20, extending its decline to the second day, after non-executive chairman Atanu Chakraborty abruptly resigned, citing differences over "values and ethics".

The shares of India's largest private lender hit the day's low of ₹781 and hovered close to their 52-week low of ₹772 hit in the last trading session. So far in March, HDFC Bank stock has lost over 10%, putting it on track for the worst monthly decline since March 2020.

Following Atanu Chakraborty's resignation, HDFC Bank hosted an investor conference call to discuss issues and assuage investor concerns, wherein Keki Mistry, a veteran of the HDFC Bank Group and interim chairman, said there may have been "relationship issues" between Chakraborty and the executive leadership, but found no "substantive" concerns behind the departure.

Mistry emphasised that the bank's operations and governance remain stable.

The RBI also, in a separate release, highlighted that there were no material governance concerns in the bank based on periodic assessments.

According to analysts, the stock could remain in a downtrend in the near term, with some suggesting avoiding fresh positions at the current juncture.

JM Financial said that it has been less bullish on HDFC Bank since the last few months, though the concerns have been on fundamentals. "Near-term stock performance may remain under pressure as investors would like to have more comfort in the management/board after this episode. The upcoming MD & CEO’s renewal in a few months may also put pressure on stock price performance," it cautioned.

While valuation remains attractive given franchise strength, the recent concerns imply a range-bound stock price outcome in the near term, according to analysts at the brokerage.

Antique Broking believes that the recent incident "casts a shadow over the board and the management team", and a lack of any stated specific instances wherein such incongruency would have occurred remains a point of concern. However, prompt support by the regulator for the bank, during this time of crisis, has been the key highlight of the incident.

Considering the valuations of the bank and the expectation of the fruits of the merger playing out, in the upcoming quarters, the brokerage has retained its 'Buy' rating on HDFC Bank stock but lowered the target price marginally to ₹1,090 from ₹1,200 earlier), valuing the bank at 2x FY28 BVPS (earlier 2.3x) and the subsidiaries at ₹150 per share.

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