HDFC, Axis and Kotak Trail Global Bank Stocks Despite India’s Boom

India remains the world’s fastest growing major economy. Its three biggest private banks would not know it from their share prices. HDFC Bank, Kotak Mahindra Bank and Axis Bank rank near the bottom of a shareholder return comparison spanning the world’s largest lenders since December 31, 2019, the last full trading day before the pandemic hit. The Sensex gained 89 per cent over that stretch. None of the three came close.

Entry price explains most of the gap. Investors paid up in 2019 for growth that only partly showed up afterward, while banks nobody wanted then, in Tokyo, Frankfurt and London, got cheap enough that even modest improvement was enough to reward shareholders handsomely.

The Scoreboard Since the Pre-Pandemic Cutoff

The comparison covers large listed banks across the United States, Britain, the Eurozone and Japan, benchmarked against India’s big three private lenders plus ICICI Bank. Only the Indian names saw their valuation multiples shrink over the period.

HDFC Bank’s and Kotak Mahindra Bank’s price-to-book multiples have roughly halved since the cutoff. Axis Bank’s has fallen by about a quarter. ICICI Bank looks like the outlier at first glance, up 168 per cent in total shareholder return, but even its multiple slipped, just by less than the others.

ICICI Bank’s smaller derating lines up with the one metric that moved decisively in its favor: return on equity, which nearly doubled even as its loan book kept expanding.

A Growth Story Priced for Perfection

Before the pandemic, HDFC Bank, Kotak Mahindra Bank and Axis Bank were compounding loans at a mid-teens to 20 per cent annual clip between fiscal 2017 and fiscal 2020. Banks in developed markets were growing loans in the single digits over the same years, a gap that mirrored the underlying economies as much as any special skill at the banks themselves.

Low global interest rates and unusually high free float made the trio favorite bets for foreign institutional investors (FIIs) heading into 2020. Investors were not just paying for loan growth; they were paying for an assumption that both growth and return on equity (RoE), a measure of how much profit a bank wrings from every rupee of shareholder capital, would keep climbing indefinitely. December 2019 valuations reflected exactly that bet.

Where the Earnings Actually Landed

The loan growth mostly continued. Profits grew too, in three of the four cases. What slipped was the return on that capital, the figure that ultimately decides whether a stock re-rates or de-rates.

• HDFC Bank: profit compounded at a 19 per cent annual rate from fiscal 2020 through fiscal 2026, a figure that includes the boost from its 2023 merger with parent HDFC Ltd.
• Kotak Mahindra Bank: earnings growth cooled to 14 per cent a year, down from 20 per cent in the run-up to the pandemic.
• Axis Bank: profit CAGR swung to a positive 56 per cent from negative 22 per cent in the prior stretch, though recent stress in its unsecured loan book has kept a lid on its multiple.
• ICICI Bank: earnings compounded fastest of the four at 34 per cent, while return on equity climbed to 16 per cent from roughly half that level.

ICICI was the only one of the four to post both faster earnings growth and a meaningfully higher RoE than its 2019 self. Its multiple barely moved. The other three kept sliding.

The Money That Made Them Expensive Left

High free float cut both ways. It made these four stocks the default India financial trade for foreign funds heading into the pandemic. It also meant they had the most foreign ownership left to lose once the trade fell out of favor.

• 25 per cent: Kotak Mahindra Bank’s current FII holding, down from a 45 per cent peak, the steepest retreat of the four banks.
• 42 per cent: HDFC Bank’s FII holding now, down from a 52 per cent peak before the pandemic.
• 43 per cent: Axis Bank’s current level, down from 53 per cent.
• 35 per cent: ICICI Bank’s FII holding, down from 38 per cent, the smallest slide of the four.

The retreat is not unique to these four stocks. Foreign investors have been pulling back from Indian equities broadly through 2026, unsettled by crude oil spikes, including a session when the Sensex sank 561 points on US-Iran tensions, a firmer dollar, and a global rotation into AI-linked hardware stocks elsewhere in Asia.

Foreign institutional ownership of NSE-listed companies fell to about 14.7 per cent by April 2026, its lowest level since 2012, while domestic institutions overtook foreign investors in aggregate equity ownership for the first time in modern Indian market history. Trade by trade, that shift shows up in exchange-level FII and DII trading data published daily by the National Stock Exchange.

The World’s Unloved Banks Had Nowhere to Go but Up

The picture flips once you leave India. Excluding JPMorgan Chase, the average price-to-book multiple of the foreign banks in the comparison, Barclays, Deutsche Bank, UBS Group and Mitsubishi UFJ Financial Group among them, stood at just 0.8 times book value as of December 2019. That is the valuation of a sector investors had largely given up on.

Growth came back anyway. JPMorgan Chase, Barclays, Deutsche Bank, UBS Group and MUFG all posted stronger loan growth, earnings growth and book value growth after the pandemic, lifting return on equity across the group. Japanese lenders, MUFG among them, and Deutsche Bank top the return rankings in the comparison, a product of starting cheap and re-rating hard.

JPMorgan Chase never traded at that 0.8 times discount, and it has kept climbing anyway, trading near 2.6 times book value by mid-July 2026. MUFG, coming off a much lower base, now sits at around 1.4 times book value, still modest by American standards but a sharp recovery for a Japanese bank stock. Deutsche Bank moved fastest of all, returning 140 per cent in the twelve months to mid-November 2025 alone, Investing.com data show, trading near a 52-week high as cost cuts and a shift toward steadier profitability drew a string of analyst upgrades.

Santander and BNP Paribas did not even need loan growth to re-rate. Santander’s loan book barely grew, but its earnings CAGR rose from about 2 per cent between 2016 and 2019 to 14 per cent between 2019 and 2025. BNP Paribas’ earnings CAGR improved from 2 per cent to 7 per cent over the same stretch. Both started cheap enough that modest progress was all it took.

State-Run Rivals Beat Them at Home Too

State-run lenders these private banks were long assumed to have outgrown have out-traded them too, at least over the past year.

Public sector names such as State Bank of India, Punjab National Bank and Bank of Baroda delivered stronger stock gains than private lenders through much of the past year, helped by improving asset quality and steadier quarterly earnings, market data tracked by brokerages show. The Nifty PSU Bank index has outperformed the Nifty Private Bank index over the past year and over longer stretches too, despite bouts of short-term volatility.

The gap reflects starting valuations more than any sudden shift in business quality. Private lenders had further to fall from rich multiples. PSU stocks had more room to climb from deeply discounted ones. It is the same mechanism replaying inside India that played out between India and the rest of the world.

What Happens Now That the Discount Is Real?

Valuations have reset far enough that some analysts now see room for another re-rating leg, provided earnings hold up. A domestic brokerage, Kotak Institutional Equities, argues HDFC Bank and ICICI Bank screen best at current prices, while Axis Bank still has to prove its underwriting before it earns back a premium.

Valuations remain compelling, despite recent outperformance, with most banks still trading below our fair values. We see scope for multiple expansion alongside steady earnings compounding.

Kotak Institutional Equities said in a note in late June, adding it holds a relative overweight stance on frontline private banks and prefers State Bank of India among public sector names.

JPMorgan Chase, for comparison, now screens as fairly valued rather than cheap on GuruFocus’s own model, a sign of how much re-rating room global bank stocks have already used up. The Indian lenders, by that logic, are only now reaching the valuation floor global banks left behind years ago.

HDFC Bank’s own re-rating case is complicated by a leadership question that has nothing to do with loan growth or asset quality. Investors are watching both the bank’s unresolved chairman search and the length of chief executive Sashidhar Jagdishan’s term, an overhang that coincided with roughly ₹1.7 lakh crore (about $20 billion) of market value erased after a part-time chairman abruptly resigned in March. The stock has also featured repeatedly on recent stocks-to-watch trading sessions, a sign traders are still digesting the multiple’s collapse.

HDFC Bank’s own book value multiple has fallen from near 4 times eight years ago, when it was the most expensive large bank in the world by that measure, to roughly 1.8 times today.

Frequently Asked Questions

What Does a Price-to-Book Multiple Actually Measure?

It measures what investors pay for each rupee or dollar of a bank’s net assets, calculated by dividing share price by book value per share. Banks are balance-sheet businesses whose lending capacity depends on regulatory capital, so investors lean on book value far more than they do for companies where earnings multiples dominate.

Why Do Foreign Investors Own So Much of HDFC Bank and Its Peers?

Free float is the biggest reason. HDFC Bank carries no promoter shareholding at all, leaving nearly the entire company available to institutional buyers, domestic and foreign alike. That made it and its private-bank peers among the easiest large-cap ways for global index funds to get exposure to Indian financial growth.

How Does Return on Equity Differ From Loan Growth as a Signal?

Loan growth shows how fast a bank is putting money to work. Return on equity shows how much profit it squeezes from every rupee shareholders have already committed. A bank can grow its loan book quickly and still disappoint on RoE if it needs fresh capital, sees margins compress, or absorbs higher credit costs, roughly what happened at HDFC Bank and Kotak Mahindra Bank after 2020.

Did the HDFC-HDFC Bank Merger Distort the Comparison?

Partly, yes. The 2023 reverse merger folded parent HDFC Ltd’s mortgage book into HDFC Bank, mechanically inflating loan growth and earnings figures in a way that has no clean equivalent among the other three lenders. That is why HDFC Bank’s 19 per cent earnings CAGR since fiscal 2020 needs an asterisk next to Kotak, Axis or ICICI, none of which merged with a parent during the period.

What Are Brokerages Forecasting for These Stocks Now?

Views vary by bank. CLSA has an Accumulate rating on HDFC Bank with a target near ₹1,200, implying about 42 per cent upside, and expects core pre-provision operating profit to grow at an 18 per cent annual clip through fiscal 2028 versus 12 per cent in the two years before. Jefferies rates Axis Bank a Buy with a ₹1,550 target, roughly 23 per cent upside, citing its capital position. Brokerages are split on State Bank of India, ranging from cautious Market Perform calls to outright Buy ratings.

Disclaimer: This article is for informational purposes only and does not constitute investment advice. Stock valuations, brokerage ratings and price targets cited here are accurate as of publication and can change quickly, so consult a qualified financial advisor before making investment decisions.