ICICI Bank narrows gap on HDFC Nifty lead

HDFC Bank is on the verge of losing its top spot in the Nifty 50 index to ICICI Bank following a sharp decline in its share price, reducing the difference in their respective weights to less than 0.5%. The once-gaping difference between the two lenders has narrowed to just under half a percentage point, from over four percentage points at the start of the year.

HDFC Bank's weight in the benchmark has dropped to approximately 9.81%, compared to ICICI Bank's 9.34%, while Reliance Industries trails with a slightly above 8% weighting. The convergence of these weights is the narrowest since at least January 2010. This shift is primarily attributed to contrasting performances of the two banks' stocks.

HDFC Bank has suffered a 29% decline this year, indicating its weakest annual performance since 2008, while ICICI Bank has seen a 6% gain. The sell-off has resulted in a loss of over $65 billion in HDFC Bank's value since its peak last year, bringing its market capitalization down to around $114.5 billion. In contrast, ICICI Bank is valued at nearly $109 billion.

HDFC Bank's Managing Director and CEO, Sashidhar Jagdishan, announced his intention not to seek another term, effective on October 26. This departure has intensified market pressure on the bank, as it undergoes a succession process amid investor concerns about an unsettled period at the board and senior-management levels. Jagdishan's resignation followed Atanu Chakraborty's March departure from the bank's board, citing practices inconsistent with his personal values and ethics.

Although the Reserve Bank of India found no material concerns regarding the bank's conduct or governance, the bank commissioned external law firms to review the implications of Chakraborty's resignation. Despite this, governance and succession issues remain central to investor discussions. The market impact of these events is evident in the index composition.

At the end of December 2025, HDFC Bank accounted for about 12.7% of the Nifty, while ICICI Bank held 8.05%. By August 31, according to Nuvama Alternative & Quantitative Research, the weights were 9.85% and 9.45%, respectively. Reliance Industries, whose shares have also weakened, now represents about 7.8% of the Nifty, down from 8.9%.

Since index weight affects passive funds and exchange-traded products tracking the Nifty, this change alters their relative influence on benchmark movements, albeit not their underlying businesses. Despite market concerns, HDFC Bank continues to report profit growth. In the June quarter, standalone net profit rose 5% to ₹19,060 crore, net interest income increased 6.7% to ₹33,535 crore, and total deposits grew 14.7%.

However, the bank's net interest margin narrowed to 3.26%, and gross non-performing assets increased to 1.17%. In comparison, ICICI Bank reported stronger growth in the same quarter, with profit after tax up 15.9% to ₹14,805 crore, net interest income rising 12.7% to ₹24,384 crore, and total loan portfolio expanding 19.6%. The bank reported a 4.36% net interest margin and a net non-performing asset ratio of 0.35% at the end of June.