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How to Evaluate the Reasons Behind Mutual Funds Investing in HDFC Bank

 

How to Evaluate the Reasons Behind Mutual Funds Investing in HDFC Bank


HDFC Bank is one of the most widely held stocks across Indian mutual fund portfolios due to its consistent financial performance, strong corporate governance, dominant market position, and long-term growth potential. As of December 2025, HDFC Bank was the top equity holding in over 1,400 mutual fund schemes, with aggregate mutual fund ownership exceeding ₹2.8 lakh crore (approx. $34 billion), according to data from Morningstar and ACE MF. As of Q3 FY25, AMFI data shows HDFC Bank was the top equity holding for 62% of large-cap mutual funds, with aggregate mutual fund holdings totalling ~₹1.2 lakh crore, accounting for 3.2% of all equity assets under management (AUM) across Indian funds. Its market capitalisation of ~₹15 lakh crore makes it India’s largest private sector bank, ensuring it cannot be overlooked by fund managers.

Key Reasons for High Allocation

  1. Market Leadership: HDFC Bank is India’s largest private-sector bank by assets and market capitalisation (₹12.5 lakh crore as of early 2026). It holds a ~15% share in private banking assets and has a vast branch network (over 6,500 branches) and digital reach.
  2. Strong Fundamentals: The bank has maintained a return on equity (RoE) of 16–18% over the past decade and a low gross NPA ratio of ~1.1% (Dec 2025), among the best in the sector.
  3. Stable Earnings Growth: It has delivered 12–15% YoY profit growth over the last five years, even amid economic volatility, making it a preferred "core holding" in diversified equity funds.
  4. Mergers & Scale: The 2022 merger with HDFC Ltd (the housing finance giant) created a financial behemoth with enhanced cross-selling opportunities in mortgages, retail loans, and wealth management—key growth levers.
  5. Index & Benchmark Influence: As a top constituent of the Nifty 50 (weight ~7.5%) and BSE Sensex (~10%), passive funds and large-cap funds are mandated to hold significant exposure.
  6. Investor Confidence: Known for transparent governance and conservative risk management, it attracts long-term institutional capital.

Disclaimer: Past performance and current holdings are not indicative of future results. Mutual fund investments are subject to market risks. The information is based on publicly available data as of early 2026 and may change. Consult a SEBI-registered financial advisor before making investment decisions. This is not investment advice.


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