Foreign portfolio investors (FPIs) shareholding in HDFC Bank touched a record high at the end of the June 2023 quarter. 

As per the latest data, FPI shareholding in India’s largest private sector bank stood at 54 per cent at the end of the June 2023 quarter against 32 per cent at the end of the corresponding quarter of the previous fiscal. Prior to this, FPI holding in the bank was at a high of 40 per cent in the March 2021 quarter.   

Kranthi Bathini, Director - Equity Strategy at WealthMills Securities, says foreign investors wanted a greater share in the pie of HDFC Bank, which has become a financial services behemoth after its merger with the parent company, Housing Development Finance Corporation (HDFC Ltd). 

Mortgage lender HDFC Ltd merged with HDFC Bank in a $40 billion all-stock deal with effect from July 1. The deal made HDFC Bank the fourth largest bank in the world in terms of market capitalisation after JPMorganChase & Co, Industrial and Commercial Bank of China and Bank of America, as per a Bloomberg analysis.

“So, with its relative valuation (compared to other global banks) and growth opportunities in India, HDFC Bank is naturally the top choice for FPIs,” Bathini added. 

At the end of the June quarter, FPI holding in HDFC  Ltd, stood at 63.58 per cent. Stocks of HDFC Ltd stopped trading on the bourses on July 12. 

Market experts also say the merger and increased market cap would have enhanced the FPI investment limit in HDFC Bank and higher inflows. 

Inflows into private banks

FPIs also raised their stake in all private banks except Bandhan Bank and IndusInd Bank during the June quarter. Yes Bank and IDFC First Bank are the other two banks that saw 13 per cent and 10 per cent increases in shareholding yearly as of June 2023. 

Bathini said private sector banks have always been the favourite for FPIs due to better management and outperformance of public sector banks in the long run. 

FPIs poured ₹1.03-lakh crore into Indian equities in the first quarter of the current fiscal, out of which the financial services sector alone garnered ₹44,065 crore or 43 per cent of the total inflow. 

VK Vijayakumar,  Chief Investment Strategist at Geojit Financial Services, said that in the first three months of CY2023, FPIs were sellers in the banking stocks, constituting their portfolio’s largest holding. 

“During the last three months they have been buying, and they have been buying the same stocks they sold in the first three months. The banking sector is doing very well and Q1 results are very good,” he added. 

The total equity assets of FPIs at the end of the June quarter stood at ₹51.39-lakh crore, of which share of financial services alone stood at ₹17.34-lakh crore or 34 per cent of their total equity assets.