Talking to ET Now, Gurmeet Chadha, Managing Partner and CIO at Complete Circle Consultants, has clear answers on both fronts — and they are more nuanced, and ultimately more reassuring, than the headline panic might suggest.
The HDFC Bank drama: A boardroom problem, not a banking crisis
Chadha wasted no time in framing the HDFC Bank situation in precise terms. “Whatever happens on the cricket pitch should remain on the cricket pitch,” he said, using the analogy to make a pointed observation: what is fundamentally a disagreement between a board and its leadership has spilled into the public domain in a way that is damaging, avoidable, and ultimately says more about communication failures than about the underlying health of the bank.
His assessment of the bank’s fundamentals is unambiguous. HDFC Bank’s asset quality has held up through every significant stress cycle India has faced in recent decades — the 2008 global financial crisis, demonetisation, COVID-19, and the 2018–19 NBFC crisis. “I do not see any issues as far as liability gathering is concerned or asset quality is concerned,” Chadha said. With Keki Mistry stepping in as interim chairman and the RBI offering implicit reassurance that there are no material issues, the risk of a liquidity event or a run on the bank is effectively off the table.
The real issue, in Chadha’s reading, is a combination of factors that accumulated quietly during the post-merger period. The integration of HDFC Limited into HDFC Bank — a structurally complex exercise that required absorbing high-cost wholesale deposits into a CASA-driven balance sheet — did not play out as smoothly as the market had expected. Add to that a series of technology-related regulatory interventions, senior leadership departures, and a communication style that Chadha describes as “reactive” compared to the proactive, assertive posture the bank maintained under Aditya Puri, and the conditions for a derating were already in place before this week’s events.
Why the stock has derated — and whether that’s a buying opportunity
The valuation picture tells the story of eroded expectations. HDFC Bank once commanded four to five times price-to-book — a premium that the market willingly paid for a bank growing its loan book at 20% annually while maintaining pristine asset quality. That era is now firmly in the rearview mirror.
At approximately 1.8–1.9 times FY28 book and around 12–13 times earnings, the stock has already undergone a significant derating. But so has the competitive landscape shifted. ICICI Bank, Axis Bank, and PSU banks have caught up substantially on growth, asset quality, and operational efficiency — eliminating the justification for a disproportionate multiple that HDFC Bank once enjoyed alone.”If the growth profile is same, asset quality is same, liability mix is same, the market will not give you a disproportionate multiple,” Chadha observed. His conclusion on current valuations: the incremental downside from here is limited, but the recovery timeline depends entirely on how quickly new leadership stabilizes sentiment and how proactively the bank communicates going forward. For investors seeking immediate capital deployment, he suggested that ICICI Bank — also down 10–15% from its peak — may offer a cleaner risk-reward at this juncture without the overhang of a boardroom controversy.
The communication deficit that cost HDFC Bank its premium
One thread runs through Chadha’s entire analysis of HDFC Bank’s troubles: communication. The bank, he argued, has consistently been too reactive — with regulators, with investors, and now with the market in the middle of a governance crisis.
Management guidance since 2022–23 has repeatedly fallen short across multiple metrics simultaneously, not by catastrophic margins, but by enough to steadily erode the credibility premium that once justified its valuation. Technology outages drew RBI censure. Senior talent attrition at the mid-management level went unaddressed publicly. Whistleblower complaints circulated in the market for months without adequate response from the board.
“Being a leader, that is what you get a multiple for — not only in terms of performance and operating metrics, but also in terms of governance standards,” Chadha said pointedly. When governance comes under a cloud, derating follows. That is not a market overreaction — it is the market doing precisely what it is supposed to do.
Geopolitical chaos: A two-pronged strategy for turbulent markets
Shifting from the HDFC Bank-specific crisis to the broader market environment, Chadha offered a practical, sector-by-sector playbook for navigating geopolitical uncertainty.
His core framework is built around one key variable: correlation to the conflict. Sectors with low correlation to oil prices, trade disruptions, or global risk sentiment can be accumulated now, in a staggered manner. Sectors that are directly exposed to the shock should be held in patience until clarity emerges.
In the buy-now camp, Chadha placed telecom, defence, pharma, and select energy names — specifically upstream producers and refiners who benefit from or are insulated against crude price spikes. The defence index correcting 3% on a day of geopolitical escalation, he implied, is precisely the kind of irrational selloff that creates entry points for patient investors.
In the wait-and-watch camp sit export-oriented sectors and companies with significant crude or hydrocarbon exposure. The logic is straightforward: hydrocarbon is a base input for practically everything. As crude climbs, working capital requirements expand, inventory costs rise, and corporate profitability across the broader economy comes under pressure. These are not stocks to chase into an unresolved conflict.
For the majority of retail investors, Chadha’s advice was grounding in its simplicity. “Continue your SIPs and monthly accumulation,” he said. The staggered, disciplined approach that systematic investing demands is exactly the right posture when nobody — not even the most seasoned institutional investors — can predict how or when the geopolitical situation resolves.
And for those paralyzed by uncertainty? “Sometimes not doing anything is also a good thing to do.”