HDFC Bank Surges as Domestic Funds Counter FII Sell-off, Boosting Indian Financial Stocks

Amid a sharp market correction experienced last month, domestic mutual funds stepped into the spotlight, positioning themselves as key counter-bidders. This aggressive movement provided critical support to the market, leading to a notable reshuffling of portfolios across major financial names like HDFC Bank, BSE, and Tata Motors.

During the period, domestic funds deployed a substantial ₹75,500 crore into Indian equities. This robust capital inflow occurred even as Foreign Institutional Investors (FIIs) sold approximately ₹1.1 lakh crore in the secondary market. This contrasting data underlines the growing and increasingly pivotal role of domestic capital as a stabilizing force during periods of high volatility.

HDFC Bank Leads Mutual Fund Buying Surge​

HDFC Bank emerged as the single most attractive investment for mutual funds across the entire financial sector. As India’s largest private sector lender, the bank attracted massive institutional interest, recording net mutual fund additions worth about ₹15,800 crore at the all-industry level.

This figure significantly outstripped other large-cap peers, reinforcing HDFC Bank's status as a cornerstone portfolio stock. The bank was among the top additions for three consecutive months, demonstrating sustained conviction despite the near-term price turbulence.

Major asset managers showcased this strong interest. For instance, ICICI Prudential MF added approximately ₹4,570 crore worth of HDFC Bank, while SBI MF executed a purchase of roughly ₹2,610 crore. Other notable additions were recorded by DSP MF and Aditya Birla SL MF, cementing HDFC Bank's prominence across the large-cap space.

BSE Captures Investor Interest as Midcap Buy​

Shifting focus to the midcap universe, the Bombay Stock Exchange (BSE) proved to be one of the most sought-after names from domestic funds during the market selloff. This concentrated buying pattern suggests that fund managers used the market correction opportunity to increase exposure to financial market infrastructure players.

Axis MF exemplified this trend, making BSE a prominent addition by purchasing about ₹560 crore worth of the exchange operator during the month. This focused buying pattern indicates high conviction in the foundational financial utility of the exchange, even when overall market sentiment was under pressure.

Profit Booking Drives Outflows from Tata Motors​

While HDFC Bank and BSE attracted fresh capital inflows, Tata Motors took the opposing path on the mutual fund trade ledger. The company was explicitly listed among the key selling candidates for mutual funds within the large-cap segment.

The pattern of transactions suggests that fund managers were actively engaging in profit-booking within Tata Motors. This capital was then efficiently reallocated towards robust sectors, particularly financial services. Investors favored shifting funds toward banks such as HDFC Bank, ICICI Bank, SBI, and Axis Bank.

Banking Sector Dominance Signals Future Direction​

The heavy buying action seen in HDFC Bank and other major lenders reflects a clear, broader sectoral tilt within the mutual fund industry. According to the sector ownership snapshot for market-cap schemes, banking continues to represent the largest sectoral exposure.

In many major AMCs, the banking sector holds weight at or above its Nifty 200 weight of 22.4%. Top-holding lists across most large fund houses are dominated by banking giants, including HDFC Bank, ICICI Bank, SBI, Axis Bank, and Kotak Mahindra Bank. This sector dominance amplified HDFC Bank's visibility in March’s activity while providing a solid backdrop for midcap plays like BSE.