HDFC Mutual Fund has increased its stake in IndusInd Bank by acquiring an additional 0.20% of the bank's paid-up shares. This move comes during a period of significant market fluctuation for the bank, which recently faced a sharp decline in its share value after announcing discrepancies in its internal derivatives accounting. The banking stock closed at Rs 672.10 on the BSE, down 1.84% as of Thursday, March 13.
According to the exchange filing on March 13, HDFC Mutual Fund's increased stake was achieved through an open market transaction on March 11. The fund acquired 15,92,410 additional shares, bringing its total holdings to 3,91,21,778 shares. This strategic move is part of HDFC Mutual Fund's broader investment strategy, highlighting its confidence in IndusInd Bank's potential for recovery and future growth despite the current volatility.
The increased stake now places HDFC Mutual Fund's holdings at 5.02% of IndusInd Bank's paid-up shares, up from 4.82% prior to the recent acquisition.
The downward spiral of IndusInd Bank's stock began on March 11 when it plummeted 27.17% following the revelation of accounting discrepancies. These discrepancies, amounting to approximately 2.35% of the bank's net worth, are expected to impact the bank's fourth-quarter results. The bank has estimated a net loss of Rs 1,520 crore, with the gross figure standing at Rs 1,970 crore. Despite these setbacks, the bank anticipates reporting a small profit for the quarter.
IndusInd Bank's stock price faced an overall decline of 32% in March 2025. However, the market reacted positively in the subsequent trading session as the bank's promoter, Ashok Hinduja, expressed confidence in the abilities of the bank's managing director and CEO, Sumant Kathpalia, to navigate through the challenges. The stock gained 4.38% following these assurances, reflecting a partial recovery from the previous losses.
MF sell-off
IndusInd Bank witnessed significant selling activity from domestic mutual funds in February, with a total of 16 million shares amounting to Rs 1,600 crore being offloaded during the month. Fund houses such as Kotak MF, Tata MF, and PPFAS MF were among those that reduced their holdings in the troubled lender.
Despite the recent trimming of their positions, domestic funds have been actively increasing their stakes in the bank over the past year. The stake held by domestic institutional investors (DIIs) in the bank surged from 24.53 percent at the end of the December 2023 quarter to 39.65 percent by the end of the December 2024 quarter.
Approximately 30.31% of the DII stake is owned by mutual funds, while Life Insurance Corporation (LIC) and individual investors have also increased their stakes in the past year. Interestingly, foreign portfolio investors (FPIs) have significantly reduced their holdings, with their percentage dropping from 40.51% in December 2023 to 24.41% by the end of December 2024.
IndusInd Bank's troubles
IndusInd Bank's recent troubles underscore the challenges faced by private lenders in maintaining financial transparency and stability. In the competitive banking sector, IndusInd Bank counts HDFC Bank and ICICI Bank among its primary rivals. These competitors have a strong market presence, with HDFC Bank consistently reporting solid growth and ICICI Bank investing significantly in research and development. Market analysts are closely monitoring IndusInd Bank's performance, particularly in light of the ongoing discrepancies and the bank's potential strategies to regain investor confidence.