HDFC Bank: Class action suits may prove to be an interim dampener

The stock may underperform until the Street gets clarity on asset quality and outcome of the litigation

Just when the HDFC Bank stock was beginning to regain momentum, three US-based law firms filing class-action suits against the lender dragged its share price down by over 5 per cent in a week. On a year-to-date (YTD) basis, the stock has shed 18 per cent. These lawsuits pertain to vehicle loans, accounting for 11.8 per cent of the bank’s total loans. While the bank has denied the allegations and expects its response to the lawsuit to be due in early 2021, analysts feel the litigation could cap the stock’s upside until a verdict is reached. 

“Class action suits are common