RBI lets LIC raise HDFC Bank stake to 9.99% as stock hits 52-week low

HDFC Bank shares touched a fresh 52-week low of ₹718.10 on Wednesday morning, extending a slide that has cut more than 15% from the stock's highs earlier this year. The selloff has been relentless. The Nifty fell for seven straight sessions. Brent crude pushed toward $92 a barrel.

Late Wednesday, the Reserve Bank of India gave Life Insurance Corp approval to raise its stake in the private lender to as much as 9.99%, HDFC Bank said in a filing. The move offers a potential floor. LIC already held roughly 4.3% of HDFC Bank as of June. The approval lets it buy another 5.7 percentage points without triggering an open offer – a signal that India's largest institutional investor sees value at current levels.

HDFC Bank's Alpha Score sits at 40/100, flagged as Mixed on the AlphaScala scale. The score reflects the tension between cheap valuation and persistent earnings headwinds. Net interest margins have narrowed, a pattern that has weighed on most private-sector lenders this year.

The stock's decline has been a drag on the broader market. HDFC Bank accounts for about 12% of the Nifty 50 by weight. The index closed at 24,078 on Wednesday, down 0.32%, its longest losing streak since March. The Sensex settled at 76,909, off 0.42%. Fund managers are the most underweight on India among Asia-Pacific markets, according to a BofA Securities survey released this week. The number of managers underweight India jumped to 32% in the first half of August, from 27% for Indonesia and 18% for China.

Oil has added to the pressure. Brent crude's push toward $92 a barrel, combined with fading hopes of a US-Iran diplomatic breakthrough, has kept import-dependent India on the defensive. A weaker rupee and higher crude prices squeeze margins at refiners and airlines. They also feed into CPI, reducing the odds of near-term rate cuts from the RBI.

LIC's approval to buy more HDFC Bank shares does not fix those macro headwinds. It does provide a named buyer with deep pockets at a time when foreign investors have been selling. The regulator's green light came just days after HDFC Bank reported steady loan growth but narrowing net interest margins.

Separately, the Securities and Exchange Board of India moved against two entities for manipulating the Sensex close during the new closing auction session. SEBI restrained Copthall Mauritius Investment and Mansi Share and Stock Broking from the market and ordered them to disgorge ₹2.96 crore and ₹71.65 lakh respectively, plus interest. The regulator said the firms placed aggressive buy and sell orders in Sensex constituents during the closing auction, creating artificial prices. The order freezes their bank accounts for debits.

The action marks the first enforcement case under the new closing auction mechanism, introduced earlier this year to reduce volatility in the final seconds of trading. SEBI had warned it would police the session closely.

Mutual fund flows tell a similar story of caution. Net inflows into debt-oriented schemes fell 28% in the four months through July compared with the same period last year, dropping to ₹2.20 lakh crore from ₹3.06 lakh crore. Equity-oriented schemes managed a modest increase. The shift out of income funds suggests institutional investors expect rates to stay higher for longer.

The next big test for Indian markets is the Symbiotec Pharmalab IPO, which opens for subscription Monday with a price band of ₹938-988 per share. The company aims to raise ₹1,757 crore. The broader tone will be set by oil, the dollar, and whether the Nifty can snap its losing streak before the August derivatives expiry.