Two acknowledged leaders in the private sector banks space are HDFC Bank and ICICI Bank. For decades, HDFC Bank has been the top dog of the market, becoming even the top weighted stock in the Nifty and Bank Nifty. It got to a point where every new and upcoming bank was touted as a possible "new HDFC Bank". That none made the cut is another story!
Both banks used different routes but arrived at the top of the heap. Their NIMs are comparable around 4% but ICICI Bank has had an easier time with cost of funding compared to HDFC Bank. On NPAs, the other important metric for measuring banks, HDFC Bank has always scored well although ICICI Bank has made rapid strides through the years to get better. But HDFC Bank's ability to hold their NPA levels consistently compared to the volatility seen in ICICI Bank figures meant that the former has been viewed as a more predictable bank. One of the contributory reasons has been that HDFC has been largely a retail focused bank, while ICICI has been more corporate focused.
Corporate loans typically carry higher default risk compared to retail loans. HDFC's retail-heavy book provides better diversification, while ICICI's earlier corporate exposure contributed to its past stress cycle, although this risk has now been significantly reduced. This has been another reason for the better perception of HDFC Bank over ICICI in the market.
In the area of credit growth, ICICI Bank has stolen the march over HDFC Bank where the latter has been a bit hampered by the merger with the housing finance wing. The fairly average growth of HDFC Bank is owing to a more conservative approach.
In the area of CASA, ICICI Bank has been faring better (39%) compared to HDFC (33%) as the latter is still hampered by the merger. This gives ICICI a relative advantage at producing better margins and the market seems to be taking note of the same. The merger has also impacted the cost to income ratio for HDFC and its ROA, both of which are now currently slightly inferior to ICICI Bank.
So, it can be seen that the two banks are running neck to neck on various measuring parameters. ICICI seems to be better positioned for higher returns driven by superior profitability and growth metrics. However, HDFC Bank offers unmatched predictability and lower risk, making it ideal for conservative investors. So why is the stock performance quite different? See chart below.
One thing that stands out immediately in this chart spanning about five years is that the decline in ICICI Bank (right side) is much less compared to that of HDFC Bank (left side). Note also how the recent decline (numbered 3) is much sharper in the case of HDFC while in ICICI, it is much gradual, implying that long exit has been a powered one in HDFC, whereas in the case of ICICI, it seems more like gradual profit taking in a down drifting market.
ALSO READ: HDFC Bank Share Price And The Question Now: Is All Well At The Posterboy Stock?
There have been three significant dips during the last five years (numbered 1,2 and 3 on the chart) and in each of these, one can note that HDFC Bank surrendered more territory compared to ICICI. This clearly denotes that the bulls were weakening progressively in HDFC but holding rather fast in the case of ICICI. Note too, that the low of March 30, 2026, in the case of HDFC was much lower when compared to that of ICICI on that same date, indicating that the bears have been a lot more successful with Hdfc compared to Icici.
The fall can be explained by the fact there has been an almost continuous exit by FIIs from HDFC Bank since December 2023 (peak holding at 52%) to the current levels of 44.5%. This 8.25% decline in their holding is more than matched by the increase in DII holding (up from 30.5% to the current 40.14% in the same period). There has been a sharp increase in DII buying in the stock over the last two quarters as the prices fell sharply. It would seem logical to conclude that DIIs stepped in to buy after the FII sold off some quantity every time! There has been no meaningful change in the public holding in the stock, which remains around 15-16% all through.
The recent misadventure of the chairman resigning seems to have brought about the acceleration that is visible on the chart. The shareholding in ICICI Bank, in the meanwhile, has remained quite steady for both FIIs and DIIs (around 44-45%) with about 9% held by the public.
Hence, the recent decline in the prices in ICICI Bank may be more owing to market sentiments rather than any long exits from large players. This, therefore, makes it a more exciting candidate for purchases within the private sector banking pack, as and when the trends revive in the market.
The critical question to ask here, therefore, would be, whether the FIIs have finished dumping their holding in HDFC Bank or likely to continue? That will depend on the future moves of the stock.
Of course, oversold pops shall happen now and then. But the other question that emerges is, considering that DIIs already own their highest quantity in their history, is it likely that they shall continue buying more of HDFC Bank if they were to be on offer?
These are questions that are not possible to answer. Results may provide us a clue. Any slip in HDFC Bank numbers in coming quarters for HDFC Bank may see continued pressure on the prices from the FIIs. If DIIs decide not to step forward, then chances are that the trends may slip further. Chart 2 is an analysis of the HDFC Bank chart alone.
It is the same chart as earlier with some retracements added and an RSI thrown in.
We can note that the price recently bounced off the 38% retracement of the long-term advance from the 2020 low. The March 26 low should, therefore, be kept as a line in the sand for investors, as a break of that is likely to lead to further fall, possibly to around 700 area (50% retracement) if not deeper. It can be seen that there was high momentum to the downside and, therefore, this rise can be treated as an oversold pop, at best.
Intending investors should ideally await some bottoming formation on the chart by way of price and momentum action, which also gets confirmed with some improvements at the numbers levels during results. Or some other good news on the corporate front. Barring that, there may be continued pressures on advances with not enough buying pressure to support advances in any sustained manner.
For now, HDFC Bank, seems to have definitely ceded its leadership mantle to ICICI and possibly other banks.
Disclaimer: The views expressed in this article are solely those of the author and do not necessarily reflect the opinion of NDTV Profit or its affiliates. Readers are advised to conduct their own research or consult a qualified professional before making any investment or business decisions. NDTV Profit does not guarantee the accuracy, completeness, or reliability of the information presented in this article.
ALSO READ: Stop Guessing, Start Selecting: Why Most Traders Pick The Wrong Stocks
Essential Business Intelligence, Continuous LIVE TV, Sharp Market Insights, Practical Personal Finance Advice and Latest Stories — On NDTV Profit.
