HDFC Bank’s losing streak and SBI’s dream rally have run their course

HDFC Bank's stock has experienced a dramatic turnaround in recent months, following the appointment of a new CEO. The bank's shares have surged 6% over the past fortnight as investors react positively to the leadership change. However, this recent rally pales in comparison to the bank's more troubling performance over the long term.

Since January, HDFC Bank's stock has plummeted nearly 30%, eroding nearly nine percent of its value over five years and five percent over three years. In contrast, State Bank of India (SBI), the country's largest public-sector bank, has been on an impressive upward trajectory. Over five years, SBI's shares have more than doubled in value, risen over 60% over three years, and delivered positive returns in most periods.

Most notably, SBI's stock has managed to generate positive returns despite a sharp decline of 20% since February. As a result of these contrasting performances, HDFC Bank and SBI have converged in terms of market capitalization. Their gap has narrowed from over Rs 4 lakh crore in 2021 to Rs 2.2 lakh crore currently. This convergence occurred despite HDFC Bank merging with its lending entity, HDFC, in 2023, which increased its valuation and widened the gap with SBI to nearly Rs 6 lakh crore at that time.