Mutual funds pump ₹17,250 crore into HDFC Bank despite 17% March fall

HDFC Bank grabbed headlines in March amid a sharp sell-off in its shares, triggered by the sudden resignation of part-time chairman Atanu Chakraborty over “ethical” concerns. The development initially sparked questions around corporate governance; however, sources indicated that the exit was largely driven by internal differences rather than any regulatory lapses.

The Reserve Bank of India (RBI) also clarified that it had found no governance or conduct-related issues and that there were no material concerns regarding the bank’s operations.

The country’s most valued banking stock witnessed a steep correction through March, declining nearly 17% during the month as sentiment took a hit. In market capitalisation terms, the private lender saw an erosion of over ₹1 lakh crore, with its valuation slipping from ₹13.66 lakh crore on March 1 to ₹12.61 lakh crore by March 31, 2026.

The sustained correction also dragged HDFC Bank shares to its 52-week low of ₹726.65 on March 30, 2026, marking a decline of more than 40% from its peak of ₹1,020.35 recorded on October 23, 2025. On a broader basis, the banking heavyweight has fallen about 20% so far in 2026, while declining nearly 19% over the past six months and around 15% over the past year, underscoring the persistent pressure on the counter.

MF buys ₹17,250 crore shares

Amid the sharp correction, mutual funds moved swiftly to accumulate the beaten-down stock, deploying nearly ₹17,250 crore during the month. By the end of March 2026, as many as 49 mutual funds held 380.81 crore shares of the bank, valued at around ₹2.79 lakh crore, compared with 360 crore shares worth ₹3.19 lakh crore a month earlier.

Leading the buying activity was ICICI Prudential Mutual Fund, which added shares worth ₹5,073 crore, followed by SBI Mutual Fund and Nippon India Mutual Fund, with purchases of ₹2,706 crore and ₹2,145 crore, respectively. Other notable participants included Parag Parikh Flexi Cap Fund, UTI Mutual Fund, HDFC Mutual Fund, and DSP Mutual Fund, all of which added meaningful exposure during the downturn.

The latest shareholding pattern for the March 2026 quarter also highlighted a clear shift between foreign and domestic investors. FPI holdings declined sharply from 47.67% to 44.05%, with the number of investors falling from 4,006 to 3,822, pointing to sustained foreign outflows. In contrast, domestic institutional investors, particularly mutual funds, stepped up buying, with MF holdings rising from 26.66% to 29.54% and the number of schemes increasing from 734 to 763. This pushed overall DII ownership to around 40.3%, largely offsetting the impact of FII selling.

Overall, institutional investors continue to dominate the shareholding, holding about 84.37% stake, marginally lower than 84.85% in the previous quarter. The bank maintains zero promoter holding and no pledged shares, reinforcing its status as a widely held, institution-driven franchise.

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