HDFC Bank: Mutual Funds Surge Buy Shares Worth ₹17,250 Crore Amid Steep Selloff After Board Shakeup

HDFC Bank: Mutual Funds Surge Buy Shares Worth ₹17,250 Crore Amid Steep Selloff After Board Shakeup​

The banking sector saw significant institutional support last month as mutual funds poured substantial capital into HDFC Bank shares. This massive buying activity occurred in the wake of a sharp correction, which saw the stock plummet following the abrupt resignation of part-time chairman Atanu Chakraborty. The underlying concerns focused on governance and management stability, presenting a notable contrast to the strong counter-buying momentum seen from key domestic investors.

The Catalyst Behind HDFC Bank's Sharp Decline​

HDFC Bank faced intense selling pressure during the month of March. The shares saw a decline of more than 17.5 percent, marking the steepest monthly drop since March 2020. This downturn represented the fourth straight month of decline for the stock. Year-to-date figures for 2026 reveal that the stock has fallen by nearly 20 percent.

The decline was catalyzed by the resignation of Mr. Atanu Chakraborty, who cited ethical concerns and disagreements regarding bank practices. While the bank assured investors that there were no operational issues and no apparent power struggle, it noted that the outgoing chairman did not share specific details regarding his remarks.

Institutional Support Fuels HDFC Bank Price Floor​

Despite the headwinds from governance questions, the institutional appetite remained robust. Mutual funds were the primary support mechanism, accumulating shares worth an estimated ₹17,250 crore during the month.

Major domestic funds led this buying spree. ICICI Prudential Mutual Fund purchased additional shares worth ₹5,073 crore. This was followed by SBI Mutual Fund and Nippon India Mutual Fund, which acquired shares worth ₹2,706 crore and ₹2,145 crore, respectively.

At month-end, ICICI Prudential Mutual Fund held HDFC Bank shares valued at ₹42,626 crore. SBI Mutual Fund maintained a significant stake worth ₹60,646 crore, while Nippon India Mutual Fund held shares worth ₹24,429 crore. Other key buyers included Parag Parikh Flexi Cap Fund, UTI Mutual Fund, and HDFC Mutual Fund, adding substantial support to the stock.

Divergence in Investor Positioning and Outlook​

The shareholding data suggests a clear divergence between foreign and domestic investors. Foreign Institutional Investors (FIIs) reduced their stake by about 3.6 percent, or 47.95 crore shares, during March. This marked the third consecutive quarter of stake reduction.

Conversely, domestic institutional investors significantly increased their exposure. Mutual funds raised their stake for the fifth consecutive quarter, increasing their holding to 29.54 percent. Provident funds also contributed substantially, buying shares worth ₹2,239 crore, while insurance companies added around ₹256 crore.

Analysts suggest caution alongside optimism. JM Financial noted that near-term performance may remain under pressure as investors seek greater clarity on management and board stability. While the brokerage maintained that valuations are attractive given the bank’s franchise strength, it cautioned that recent concerns could keep the stock range-bound in the near future, particularly pending the renewal of the Managing Director and CEO position.