HDFC Bank: Mutual funds sold Rs 11,000 crore worth shares in Nov; what's ahead?

HDFC Bank Ltd, whose shares have delivered positive return in the past couple of months, saw Rs 11,000 crore in mutual fund (MF) selling in November. MFs sold a net 6.1 crore HDFC Bank shares for the month. They owned 150.20 crore HDFC Bank shares at November end against 156.30 crore shares at October end. Despite this, the stock is up 8 per cent in the past one month against a 3.41 per cent rise in the BSE Sensex during the same period.

To recall, the second tranche of float-led weight adjustment in HDFC Bank due to the MSCI rejig took place in November. It was estimated to result in approximately $1.9 billion inflows to the HDFC Bank counter.

“Mutual funds utilised the MSCI-driven liquidity at November-end to partially exit inclusion names such as HDFC Bank (Rs 11,000 crore),” said Nuvama Alternative & Quantitative Research.

The HDFC Bank stock has 28 ‘strong buy’ calls, five ‘buy’ and seven ‘hold’ recommendations, as per data publicly available with Trendlyne.

While MFs sold HDFC Bank shares last month, Nomura said foreign investors that it met in Singapore and Tokyo were largely sanguine that HDFC Bank was getting things back on track with management’s clear prioritisation on bringing down LDR. “Most investors appear to have made peace with lower near-to-medium term loan growth trajectory. Investors expect HDFC Bank’s asset quality to hold up well, at a time when this is becoming as an increasing concern for other lenders,” it said.

Emkay Global said the HDFC Bank’s recent outperformance over private peers has been on account of its relatively better margin, asset quality outcomes amid rising asset quality noises in unsecured loans.

The brokerage also noted that the private lender has implemented a strategy to securitize loans, in addition to slowing down credit growth and accelerating deposit growth, with the goal of reducing its Loan-to-Deposit Ratio (LDR) to pre-merger levels over time and avoiding regulatory issues.

Furthermore, HDFC Bank is planning to launch an IPO for its NBFC subsidiary, HDB Financial Services, amounting to Rs 12,500 crore, which includes an offer for sale (OFS) of Rs 10,000 crore. This move is in line with regulatory requirements and aims to unlock value.

“Given the current tight liquidity conditions, there is growing speculation about the possibility of a CRR cut. If the RBI moves forward with such a cut, it could ease the pressure on liquidity, which would likely be positive for HDFC Bank. A 50bps CRR cut could result in a 2-3bps improvement in NIMs,” the brokerage added.

Nomura India values the stock at Rs 1,780, valuing the core bank at 2 times September 2026F book value and the subsidiaries at Rs 239 per shares. Strong delivery on deposits and NIMs are risks to upside on the counter while further weakness in deposit mobilisation affecting the loan growth outlook is risk to the downside, it said.

Nirmal Bang values the HDFC Bank’s core business at 2.5 times September 2026E adjusted book value. Post adding subsidiary value per share of Rs 215.50 at 15 per cent holding company discount, it has derived a target price of above Rs 2,000 level (at Rs 2,026) for HDFC Bank.
“We believe this target multiple adequately captures a loan and earnings CAGR of 11.5 per cent and 11.9 per cent, respectively over FY24- FY27E, which results in RoA/RoE of 1.9 per cent/ 15 per cent in FY27E,” it said last month.