HDFC Bank FII Selloff: 48 Cr Shares in Q4 FY26

What changed for HDFC Bank in the March quarter

Foreign Institutional Investors (FIIs) reduced their holding in HDFC Bank by nearly 4 percentage points in the March quarter (Q4 FY26), after a steep fall in the lender’s share price. Overseas investors offloaded about 47.95 crore shares during the quarter, in a move the report valued at roughly ₹43,000 crore. The selling coincided with a governance crisis that triggered regulatory scrutiny and a sharp reset in the stock’s valuation. HDFC Bank’s stock fell nearly 26% in the first three months of 2026, as sentiment weakened following a leadership shock and broader risk-off triggers.

FIIs trim stake for a third straight quarter

The latest shareholding data showed FII ownership falling to 44.05% as of March 31, 2026, from 47.67% at the end of December 2025. This marked the third consecutive quarter of stake reduction by foreign investors in India’s largest private lender. The scale of selling was described as a significant rebalancing in the bank’s shareholding structure, with foreign investors ceding ground as domestic capital stepped in.

Domestic mutual funds step in as buyers

Mutual funds raised their holding in HDFC Bank to 29.54% at end-March from 26.66% in December. The shift highlighted how domestic institutions absorbed supply during the foreign selling wave. Separately, in a market correction, mutual funds bought 1.22 crore shares of HDFC Bank estimated to be worth ₹1,859 crore.

Chairman resignation becomes the immediate trigger

The selloff followed former chairman Atanu Chakraborty’s resignation in mid-March. In his resignation letter, he cited “certain happenings and practices within the bank” that were “not in congruence” with his personal values and ethics. The development unsettled investors and intensified concerns around governance.

HDFC Bank’s shares saw an 8.7% single-day plunge after the resignation. Over three sessions, the move erased $16.3 billion in market value, according to the report. Another snapshot of the drawdown noted the stock was down 21% within the first three months of 2026 and had slipped into bear market territory from its record high of ₹1,020 hit on October 23, 2025.

Intraday shock and the market-cap hit

The downside move also showed up in sharp intraday declines. One account noted HDFC Bank shares crashed about 9% at the open on a trading day, wiping off about ₹1 lakh crore from market capitalisation within minutes. The stock was described as being on track for its worst daily performance since 2020, when the lender had plunged nearly 13% during the COVID-19 crash. After the sharp fall, the market capitalisation was cited at a little over ₹11.85 lakh crore.

West Asia risk adds to pressure

Beyond bank-specific concerns, a macro trigger was also flagged. The escalation of the US-Iran conflict in late March pushed crude oil above $106 per barrel, adding to broader market anxiety. A brokerage note referenced concerns around the chairman’s exit and the potential impact of a West Asia conflict as factors behind the bank underperforming its peers.

Signs of stability after RBI’s interim appointment

The selling pressure drove the stock to a 52-week low of ₹731.55 on March 30, 2026. The stock later rebounded to ₹750.90 on April 2, after the RBI appointed Keki Mistry as interim chairman. The move was seen as providing near-term stability to the board, even as investors tracked developments linked to governance and regulatory scrutiny.

What brokerages and valuations are indicating

Despite the drawdown, some market participants argued valuations had become more attractive. Motilal Oswal and Jefferies’ analysts reiterated “Buy” ratings, while noting the stock was trading at multi-year low valuations of 1.6x FY27E adjusted P/B. The brokerage commentary referenced “stronger asset quality, healthy growth and ROE”, and said sensitivity to higher credit costs and lower topline appeared “manageable”, even as uncertainty persisted.

Mutual fund exposure and investor wealth impact

HDFC Bank’s sharp slide also weighed on mutual fund portfolios, where the stock features among the top three holdings across many schemes. A report estimated that a 16.4% decline “so far this month” translated into an erosion worth about ₹50,000 crore in mutual fund investor wealth, assuming exposure remained broadly in line with February-end levels. As of February-end, mutual funds held HDFC Bank shares worth ₹3.2 trillion across active and passive schemes. Nearly 50 active equity and hybrid schemes had over 9% of their corpus invested in the stock as of February 27, highlighting the concentration risk during a rapid selloff.

Key numbers at a glance

Context from earlier mutual fund flows

A separate dataset also showed that in August, several mutual fund houses sold HDFC Bank shares worth around ₹8,200 crore, with about 5.06 crore shares sold. It was described as the first time in eight months that mutual funds had sold shares of the bank, after net purchases of ₹45,000 crore between January and July 2024. Among the sales cited were Kotak Mahindra Mutual Fund’s sale of about 2.56 crore shares valued at ₹4,188 crore, Quant Mutual Fund selling its entire holding of 1.73 crore shares worth ₹2,827 crore, and SBI Mutual Fund selling 68 lakh shares worth ₹1,110 crore.

At the same time, some buyers were also listed, led by ICICI Prudential Mutual Fund buying 1.19 crore shares worth ₹1,947 crore, followed by UTI Mutual Fund (₹251 crore) and Nippon India Mutual Fund (₹238 crore). Overall, 41 mutual funds held around 153.87 crore shares valued at ₹2.51 lakh crore in August, down from ₹2.59 lakh crore in July. The reason for the large-scale selling by some mutual funds was described as unclear.

Why the quarter matters for investors

The March-quarter moves show a clear rotation in ownership, with FIIs reducing exposure while domestic mutual funds increased their stake. The immediate catalyst was the chairman’s resignation and the language used in his letter, which amplified governance concerns and contributed to rapid price discovery. At the same time, macro risks such as the crude oil spike added pressure to sentiment.

Conclusion

HDFC Bank ended the March quarter with lower FII ownership and higher mutual fund participation, after a steep correction that took the stock to a 52-week low. The RBI’s appointment of Keki Mistry as interim chairman was cited as a stabilising step as markets digest governance-related developments. Investors are likely to track further clarity on board and regulatory issues, alongside how risk factors like crude oil volatility influence banking sector sentiment.