HDFC Bank has seen a sharp decline in foreign investor ownership since its merger with HDFC, as the bank has faced growing investor scrutiny over its growth, margins and leadership transition.
Foreign institutional investor holdings in HDFC Bank stood at 52.13% in September 2023. By June 2026, it had fallen to 41.82%, a drop of 10.31 percentage points. The latest quarter saw a particularly steep decline, with FII holding falling from 44.05% in March 2026 to 41.82% in June 2026.
The lender was once among the most preferred Indian financial stocks for foreign investors. Its long record of steady growth, strong asset quality and premium valuation had made it a core holding in many India portfolios. However, the post-merger period has been more challenging, with investors becoming increasingly cautious about the bank’s growth trajectory and profitability.
The merger with HDFC Ltd expanded the bank’s balance sheet sharply, but it also brought funding and margin challenges. The bank has been working to reduce its elevated loan-to-deposit ratio, improve deposit mobilisation and rebuild return ratios. Investors have also been watching whether the bank can regain its earlier growth premium over peers such as ICICI Bank and Axis Bank.
The decline in foreign ownership has coincided with a period of weak stock performance. On the exchanges, HDFC Bank shares have delivered muted to negative returns over the past three years.
The sharp sell-off in HDFC Bank matched the performance on the exchanges, where the shares delivered near flat to negative returns in the last three years.
