HDFC Bank sees ₹17,250cr MF buying in 2026 sell-off

March 2026: a governance scare meets contrarian buying

March 2026 brought unusual volatility to HDFC Bank, India’s largest private lender and a heavy-weight stock in key indices. The trigger was the sudden resignation of part-time, non-executive chairman Atanu Chakraborty, which set off governance concerns in the market. The stock sold off sharply in the days that followed, with reports describing a fall of more than 17.5% during the month. Yet, even as the price corrected and foreign investors reduced exposure, domestic mutual funds stepped up buying in size.

Mutual fund purchases of ₹17,250 crore during the period stood out because they came amid heightened uncertainty. The episode also drew attention because HDFC Bank carries around 11% weight in the Nifty 50, amplifying its impact on broader market sentiment.

The resignation that triggered the sell-off

Atanu Chakraborty resigned with immediate effect, and his resignation letter referred to “differences” over values and ethics. In reporting around the event, his letter was also described as referring to certain “happenings and practices” that were not in congruence with his values and ethics. The lack of specific details in the public domain added to investor nervousness.

As concerns spread, HDFC Bank’s share price weakened across multiple sessions, with coverage noting a steep correction from levels above ₹1,000 to around ₹700, implying a drop of nearly 30% from those highs. The stock also hit multiple reported 52-week low reference points in the coverage, including ₹770 on the NSE, ₹751.4, and ₹745.7.

What HDFC Bank and the board said next

HDFC Bank told stock exchanges that Chakraborty did not mention any happenings or practices that were not in congruence with his personal values and ethics. The bank said that the resignation and the concerns raised in the market did not point to events or practices at the bank that conflicted with his personal values.

Following the resignation, veteran group executive Keki Mistry took charge as interim chairman. He said there may have been “relationship issues” between Chakraborty and the executive leadership, but he found no “substantive” concerns behind the departure and stressed that operations and governance remain stable.

To reinforce governance standards, the board approved the appointment of external law firms, both domestic and international, to review Chakraborty’s resignation letter. The decision was approved at the board meeting held on March 23 and disclosed in an exchange filing on March 24. The law firms were asked to submit their report within a reasonable period of time.

Stock moves: sharp fall, then a two-day rebound

The sell-off was followed by a rebound across two sessions, as investors reacted to management commentary and the decision to commission an external review. On Tuesday, March 24, the stock closed 2.8% higher at ₹764.90. On Wednesday, March 25, it extended gains, rising over 3% to an intraday high of ₹791.35 on the NSE. At around 11:15 AM on March 25, the stock was trading near ₹791, up 3.4%.

The bounce followed a sharp decline of about 12% over the previous three sessions, according to the reported market move around the resignation. In the last two sessions referenced in the report, the stock rose over 6% from a low of ₹744.15.

Mutual funds deploy ₹17,250 crore as FIIs pare holdings

While the stock was under pressure, mutual funds bought aggressively. Coverage said mutual funds invested ₹17,250 crore in HDFC Bank shares during the period, framing it as a contrarian response to the sell-off.

ICICI Prudential Mutual Fund led buying with ₹5,073 crore invested, followed by SBI and Nippon India Mutual Funds (amounts for the latter two were not specified in the provided text). By the end of March, 49 mutual funds held nearly 381 crore HDFC Bank shares.

At the same time, foreign institutional investors reduced their stake. FIIs lowered ownership from 47.67% to 44.05%, while mutual funds increased their holding for the fifth quarter in a row. Another data point in the reporting said mutual funds increased their stake from 26.02% to 26.66%.

Broader market context and index linkage

Because HDFC Bank has around 11% weight in the Nifty 50, sharp moves in the stock affected overall market tone. In one session referenced, the Nifty 50 was quoted at about 23,431, up 518 points or 2.25% while HDFC Bank traded higher. In another segment of the coverage tied to a deeper fall, the Nifty 50 was described as down nearly 600 points to around 22,550.

The sell-off was also linked to a meaningful market-cap erosion in reported figures. Over four sessions, the stock was said to have lost roughly 10% and wiped out about ₹135,000 crore in market capitalisation. In another reported snapshot, HDFC Bank’s market capitalisation was described as having fallen by nearly ₹135,000 crore to ₹11,48,000 crore in the last four sessions.

Separately, one report mentioned a ₹103,000 crore “wipeout” in a single day (March 19), underscoring how sensitive the stock was to headline risk.

Analyst and brokerage views: ratings stayed constructive

Analyst commentary in the provided text remained largely constructive despite near-term uncertainty. Globe Capital Market’s head of research, Gaurav Sharma, said a committee had been formed and was yet to submit its report. He also said that, from an investment perspective, for a one-year horizon and beyond, the levels looked attractive for adding, and investors already holding the stock could consider averaging at current levels.

Brokerage coverage listed several published targets and ratings. ICICI Securities, in a report dated March 20, maintained a BUY rating with a target price of ₹1,120, noting comfort from HDFC Bank’s explanation and referencing regulatory assurance. HSBC Global Investment Research maintained a buy rating while cutting its target to ₹990 from ₹1,070, implying a 26.8% upside from the previous close of ₹780.45.

A separate summary said 46 out of 48 analysts covering the stock had a ‘Buy’ rating. The article also listed targets from multiple brokerages, including Jefferies (₹1,240), CLSA (₹1,200), Bernstein (₹1,200), MOFSL (₹1,175), Nuvama (₹1,170), and Kotak Institutional (Add, ₹1,050). Axis Direct was also cited with a Buy rating and a target price of ₹1,020.

Mutual fund exposure: widely held across schemes

HDFC Bank is widely held among Indian mutual funds, with the reporting saying more than 740 schemes own the stock and many have over 5% exposure. Examples cited included Franklin India Flexi Cap (8.46%), Parag Parikh Flexi Cap (7.73%), Canara Robeco Flexi Cap (7.60%), Mirae Asset Large & Mid Cap (6.75%), and DSP Large & Mid Cap (6.57%).

The same coverage noted that mutual funds had around 26.6% holding in HDFC Bank as of December 2025, and that the recent decline affected the NAVs of large-cap and flexi-cap schemes due to the stock’s weight in portfolios.

Regulatory and operational references cited in the coverage

The reporting included references to the Reserve Bank of India stating there were no material governance concerns based on periodic assessments. RBI also approved HDFC Bank’s request for a transition arrangement regarding the position of part-time chairman.

On fundamentals, the text cited Q3 FY26 indicators including profit growth of about 11% year-on-year and net interest margin at 3.51%. It also cited asset quality metrics GNPA at 1.24% and NNPA at 0.42%, and capital adequacy around 19.9%.

Separately, media reports were cited stating that HDFC Bank had reportedly terminated three senior executives for alleged involvement in the mis-selling of Credit Suisse’s Additional Tier 1 bonds, a development that coincided with another bout of selling and a move to a reported 52-week low of ₹745.7.

What investors will track from here

The next key datapoint flagged in the coverage is the external law firms’ review and the timing of any findings communicated by the bank. Market participants are also watching for continued clarity on leadership and board stability following the interim arrangement.

Another forward marker mentioned in the reporting is the next CEO term cycle, with the current MD and CEO’s next term due in October 2026, which some brokerages described as a milestone for restoring confidence. For now, the stock’s near-term movement has remained tightly linked to governance headlines, regulatory comfort, and evidence of operational continuity.