Foreign Investors Growing Interest: HDFC Bank Shareholding Hits Record High in 2023 Q2.


Foreign Portfolio Investors (FPIs) have significantly increased their shareholding in HDFC Bank, reaching a record high by the end of the June 2023 quarter. The latest data indicates that FPI ownership in India's largest private sector bank has surged to 54 per cent, up from 32 per cent in the corresponding quarter of the previous fiscal year. This notable surge comes after the bank's merger with its parent company, Housing Development Finance Corporation (HDFC Ltd), which transformed HDFC Bank into a financial services behemoth. It's worth noting that before this, FPI holdings in the bank peaked at 40 per cent in the March 2021 quarter.

Foreign Investors' Growing Interest HDFC Bank Shareholding Hits Record High in 2023 Q2.

Kranthi Bathini, Director of Equity Strategy at WealthMills Securities, highlighted that foreign investors were keen on having a larger share in HDFC Bank, primarily due to its relative valuation compared to other global banks and its growth opportunities in India. The merger with HDFC Ltd also contributed to making HDFC Bank the fourth-largest bank in the world in terms of market capitalization, following JPMorgan Chase & Co, Industrial and Commercial Bank of China, and Bank of America, according to a Bloomberg analysis.

During the June quarter, FPI shareholding in HDFC Ltd reached 63.58 per cent, and trading of HDFC Ltd's stocks ceased on July 12 following the merger. Market experts believe that the merger and the subsequent increase in market capitalization likely led to enhanced FPI investment limits in HDFC Bank and attracted higher inflows.

Apart from HDFC Bank, FPIs also raised their stakes in various other private banks during the June quarter, except for Bandhan Bank and IndusInd Bank. Two major beneficiaries of this increased interest were Yes Bank and IDFC First Bank, which saw their shareholdings rise by 13 per cent and 10 per cent, respectively, as of June 2023.

According to Bathini, private sector banks have always been favored by FPIs due to their superior management and long-term outperformance compared to public sector banks.

Overall, FPIs injected a substantial amount of ₹1.03-lakh crore into Indian equities during the first quarter of the current fiscal year, with the financial services sector alone attracting ₹44,065 crore, which accounts for 43 per cent of the total inflow.

VK Vijayakumar, Chief Investment Strategist at Geojit Financial Services, pointed out that during the first three months of CY2023, FPIs were selling banking stocks, constituting their portfolio's largest holding. However, over the last three months, they have shifted to buying the same banking stocks again. This shift in behavior is attributed to the banking sector's strong performance, particularly evident in the impressive Q1 results.

At the end of the June quarter, FPIs' total equity assets in India amounted to ₹51.39-lakh crore, with financial services accounting for ₹17.34-lakh crore or 34 per cent of their total equity assets.

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