HDFC Bank selloff: Mutual funds bought ₹17,250 cr in March 2026

What changed in March for HDFC Bank

March 2026 turned into the worst month for Indian equities in six years, and HDFC Bank became one of the most closely tracked stocks in that decline. The share price fell more than 17.5% during the month, its steepest monthly drop since March 2020. It was also the fourth straight month of decline for the stock. For 2026 so far, HDFC Bank was down nearly 20%.

Despite the sharp correction, domestic mutual funds used the selloff to increase exposure. Across funds, buying interest was concentrated in the correction window, as portfolios treated the move as an entry opportunity rather than a reason to exit.

Trigger: resignation and governance concerns

The immediate trigger cited in the coverage was the sudden resignation of part-time chairman Atanu Chakraborty. He cited ethical concerns and disagreements over bank practices, which added to investor anxiety around governance and management stability. The bank also issued a clarification that there were no undisclosed reasons behind the resignation.

The market reaction was swift. On Thursday, March 18, 2026, HDFC Bank shares fell 8.6% on the NSE and hit a 52-week low of ₹770 during intraday trading. Another data point in the reports pegged the share price at ₹806 after a decline of over 4% (down ₹37 or 4.39%).

Mutual funds’ headline bet: ₹17,250 crore of buying

Mutual funds bought HDFC Bank shares worth ₹17,250 crore in March, according to the report. Buying was led by large domestic fund houses, with ICICI Prudential Mutual Fund buying additional shares worth ₹5,073 crore. SBI Mutual Fund and Nippon India Mutual Fund followed with purchases worth ₹2,706 crore and ₹2,145 crore, respectively.

Other named buyers during the correction included Parag Parikh Flexi Cap Fund (₹2,037 crore), UTI Mutual Fund (₹1,089 crore), HDFC Mutual Fund (₹1,075 crore), and DSP Mutual Fund (₹822 crore). Additional buyers listed were Aditya Birla Sun Life Mutual Fund, Tata Mutual Fund, Edelweiss Mutual Fund, Canara Robeco Mutual Fund, and Mirae Asset Mutual Fund.

How holdings changed from February to March

The change in valuation and quantity held shows how the fall altered portfolio math. As of March 2026, 49 mutual funds held 380.81 crore shares of HDFC Bank valued at ₹279,000 crore. In February, mutual funds held 360 crore shares valued at ₹319,000 crore.

That combination of a higher share count but lower market value reflects the severity of the drawdown. It also underlines why the stock’s move matters to the broader mutual fund industry, given its common presence in top holdings across many schemes.

Where the biggest buyers stood at March-end

Post-buying, the holdings disclosed for three large fund houses showed continued heavy exposure. As of March-end, ICICI Prudential Mutual Fund held HDFC Bank shares worth ₹42,626 crore. SBI Mutual Fund’s holding was valued at ₹60,646 crore. Nippon India Mutual Fund held stock worth ₹24,429 crore.

Separately, multiple reports highlighted that HDFC Bank remained a core holding across mutual funds even after the leadership change. This includes fund categories such as flexi cap, large cap, arbitrage, value, and hybrid funds.

Stake shift: domestic funds up, foreign investors down

The reports noted that FIIs cut stake while domestic funds raised holdings. On the domestic side, mutual funds increased their stake for the fifth consecutive quarter to 29.54% from 26.66%. During the quarter, mutual funds bought about 2.88% stake, equivalent to 38.67 crore shares worth ₹28,293 crore.

Other domestic institutions also added. Provident funds bought shares worth ₹2,239 crore, while insurance companies added around ₹256 crore worth of shares.

Why HDFC Bank is heavily owned in mutual funds

Two reasons repeatedly cited were liquidity and index-level significance. One report said HDFC Bank has more than 90% free float market capitalisation, while another put free float close to 99%. High free float and trading liquidity matter for fund managers who need the ability to scale positions.

Breadth of ownership is also high. Trendlyne data cited in the reports said 735 mutual fund schemes held HDFC Bank as of February 2026. Of these, 305 funds bought shares, while 138 schemes sold.

Snapshot table: key March and quarter datapoints

HDFC Bank weight in major mutual fund houses

The weight data published alongside the selloff shows why the stock’s move can influence fund performance. Several large fund houses had HDFC Bank among their key holdings.

Market impact on schemes and investors

The fall in HDFC Bank fed directly into mutual fund NAVs because of the stock’s widespread inclusion in equity portfolios. Reports described it as a cornerstone holding across a large number of schemes. Data points in the coverage also suggested the bank’s market cap fell by ₹200,000 crore in March, and mutual fund investors saw an erosion of ₹50,000 crore.

At the scheme level, Trendlyne data highlighted high exposures by AUM share, including Parag Parikh Flexi Cap (₹10,739 crore exposure, 7.73% of AUM) and ICICI Prudential Large Cap (₹7,091 crore, 9.16% of AUM). Such concentrations can make short-term fund returns sensitive to single-stock moves.

Why the March buying matters

The March activity is notable because it combines three signals: a sharp price drawdown, a governance-related headline risk event, and meaningful domestic institutional accumulation. The numbers show mutual funds were not only holding HDFC Bank in size but also adding during volatility.

It also shows how domestic institutions can offset foreign selling pressure in large-cap names. With mutual funds raising stake to 29.54% and buying 38.67 crore shares worth ₹28,293 crore during the quarter, the shift in ownership structure became part of the market narrative.

Conclusion

HDFC Bank’s March 2026 selloff was driven by a leadership resignation and governance concerns, but mutual funds responded with heavy buying worth ₹17,250 crore. Holdings rose in share count even as market value fell, underlining the impact of price on portfolios. The next key datapoints for investors will be subsequent shareholding disclosures and any further official updates tied to governance and management stability.