MC Analysis | HDFC, ICICI & Kotak Mahindra lift share of top 10 banks’ market cap from 57% to 78% in 5 years

HDFC, ICICI & Kotak Mahindra lift share of top 10 banks’ market cap from 57% to 78% in 5 years

HDFC Bank, ICICI Bank and Kotak Mahindra Bank, the top three private lenders by market capitalisation, have expanded their combined share of the top 10 banks’ market cap from 57 percent in FY20 to 78 percent in Q2 FY26, marking a 21 percentage point rise over five years.

HDFC Bank’s market cap rose from Rs 4.89 lakh crore to Rs 15.44 lakh crore, ICICI Bank grew from Rs 1.79 lakh crore to Rs 9.84 lakh crore, and Kotak Mahindra Bank climbed from Rs 1.99 lakh crore to Rs 4.18 lakh crore.

While five years ago, the three lenders formed a dominant bloc, they still left ample room for other banks, including Bank of Baroda, Canara Bank, and Punjab National Bank, whose combined share of the market cap accounted for nearly 43 percent of the top 10 banks’ valuation.

At the time, investors had a relatively balanced spread of capital across private and public banks, with private lenders already demonstrating higher growth potential, but public sector banks still playing a significant role in the index.

Fast forward to the most recent fiscal year, the landscape has shifted dramatically. The combined market capitalisation of these three banks now accounts for 78 percent of the total market cap of the top 10 Nifty Bank stocks, leaving smaller private banks such as IDFC First and IndusInd Bank, along with public sector players, with only a fraction of influence.

While Axis Bank emerges as the third-largest private lender in terms of Assets Under Management (AUM), reflecting its sizeable loan book, Kotak Mahindra Bank holds the third position in terms of market capitalisation, a distinction driven less by sheer scale and more by investor perception of quality.

According to analysts, Kotak’s premium valuation is anchored in its historically strong asset quality, conservative risk management, superior return ratios and a business model that has consistently prioritised profitability and stability over rapid balance sheet growth.

In contrast, Axis Bank’s larger AUM base is a result of its operational heft and deeper market penetration, but its valuation multiple has traditionally lagged Kotak’s due to comparatively higher credit cycle sensitivity and past asset quality concerns.

On asked if this drastic increase in market share could potentially lead to consolidation, analysts said, this trend could lead to consolidation, but not in the dramatic bank shutdown sense.

“What is actually happening is, HDFC Bank, ICICI Bank and Axis Bank are attracting a disproportionate share of investor money, deposits and high-quality borrowers. As they grow faster and cheaper, smaller and mid-sized banks are finding it harder to compete on pricing, technology and capital. Over time, this creates pressure points,” they said.

Large private banks benefit from a combination of higher operational efficiency, stronger asset quality, diversified revenue streams, and aggressive retail and corporate expansion. HDFC Bank, for example, has leveraged its extensive branch network, digital banking infrastructure, and strong liability franchise to maintain steady credit growth while controlling asset quality risks.

On the other hand, ICICI Bank’s transformation over the past decade, including its focus on retail lending and technology-driven processes, has made it a preferred choice for investors seeking sustainable growth. Kotak Mahindra Bank, too, has carved a niche through disciplined lending practices and a strong presence in high-margin segments like wealth management and SME lending.

In contrast, smaller banks and public sector players, while growing, have not kept pace with the rapid expansion of these private giants. Structural challenges, legacy issues, and slower adoption of technology have contributed to their relative underperformance in market capitalisation terms. This has resulted in a widening gap, with investors increasingly concentrating capital in banks perceived as stable, profitable, and growth-oriented.