HDFC Bank emerges as top choice for global EM funds with record ownership

Copley Fund Research finds HDFC Bank held by 71% of EM funds, making it the most critical emerging-market bank globally, with allocations surging post-HDFC merger

HDFC Bank has cemented its position as the most critical emerging-market (EM) bank in global portfolios, according to analyst Steven Holden of Copley Fund Research, who publishes on Smartkarma.

 

India’s most valuable lender is now held by 71 per cent of all actively managed EM funds — the highest representation in Holden’s 17-year dataset. In the past six months alone, 13 new funds have initiated positions, while only one has exited, underscoring its enduring appeal to global money managers.

 

“HDFC Bank has been a longstanding overweight among active EM managers, though the strength of that overweight has declined since its inclusion in the MSCI Emerging Markets (EMs) Index. Still, just over half of the managers in our analysis remain overweight the stock relative to the benchmark,” Holden said.

 

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The bank’s strategic heft has grown since its 2023 merger with parent Housing Development Finance Corporation. The integration has created a larger balance sheet, broadened retail reach, and improved its funding profile, driving stronger allocations than rivals such as ICICI Bank, Mexico’s Banorte, Indonesia’s Bank Central Asia, and even China Construction Bank.

 

For many “aggressive growth” funds, HDFC Bank has become a cornerstone holding. At least four — Flossbach von Storch, Royal Bank of Canada, VanEck, and Switzerland’s Amonis — hold allocations above 7 per cent, reflecting the bank’s outsized importance. 

 

While the average portfolio weight in HDFC Bank currently stands at 1.78 per cent, slightly below its 2023 peak but still well above historical norms, its prominence remains unparalleled. Over the past year, its shares have risen nearly 20 per cent, outperforming the MSCI EMs index and dramatically outpacing the Nifty 50, which has slipped 1.5 per cent.

 

HDFC Bank, whose depository receipts trade on the New York Stock Exchange, is also among the most-tracked stocks globally by research analysts. At present, 47 analysts have a ‘buy’ recommendation and two a ‘hold’. Bloomberg’s consensus 12-month price target is ₹1,130, implying an 18 per cent upside from current levels.

 

BNP Paribas is among the most bullish, with a target price of ₹1,385.

 

“As the easing cycle comes with delayed benefits of fixed deposit repricing, increased current account savings account (CASA) momentum, or a likely loan-mix shift, HDFC Bank, in our opinion, remains a counter-intuitive beneficiary of easing. Valuations at 2.3x one-year forward core book value per share still do scant justice to the likely return to pre-merger core return on equity (RoE) by exit 2026-27, even if CASA acceleration is modest. Any positive surprise to our barely double-digit CASA growth expectation in an ‘easy’ environment will foreshorten the waiting period for RoE mean reversion substantially, in our view. HDFC Bank remains our top pick in the banking space,” the brokerage said in a note last month.

 

HDFC Bank recently issued one bonus share for every share held.

 

JP Morgan has a ‘neutral’ rating on the stock and set a September 2026 target of ₹1,050.

 

“We value the parent bank (September 2026 value of ₹920 per share) using the dividend discount model, assuming medium-term earnings per share growth of 15 per cent, RoE at 15 per cent, and 11.5 per cent cost of equity, implying one-year forward price-to-book and price-to-earnings of 2.17x and 15.6x, respectively. We assign a value of ₹120 per share to the subsidiaries,” JP Morgan said in a note dated August 8.