Wednesday’s sharp drop of 8.5% in shares of India’s largest private sector lender HDFC Bank has also left mutual fund investors worried as the Nifty stock is the single largest holding in equity MFs and forms about 7.1% or Rs 211,460 crore of the total assets under management (AUM). However, money managers were smart enough to use the Santa rally to book some profits off the table.
December month data shows that mutual funds deployed a sell on rise strategy and sold 2.54 crore shares of HDFC Bank as the stock ended 9.7% higher in the month.
HDFC Bank is the single largest equity holding of multiple mutual fund houses like SBI MF, HDFC AMC, Nippon India, UTI MF, Kotak Mahindra MF, Aditya Birla Sun Life, Mirae Asset and DSP Mutual Fund.
Data shows that during the month SBI Mutual Fund, which is India’s largest asset manager with equity AUM of Rs 614,600 crore, sold 33.6 lakh shares of HDFC Bank. Nippon India sold 16 lakh shares, Kotak 14.46 lakh and Aditya Birla 29.9 lakh of the lender.
During the month, AMCs reduced weightage in not just HDFC Bank but the entire financials sector with a 22 basis point contraction. Other sectors on the sell list were discretionary consumption, auto and healthcare.
At the same time, money managers used the opportunity to raise exposure in industrials, utilities, metals and oil and gas.
In one of the worst crashes in the last 3 years since the lows of March 2020 during the peak of Covid crisis, HDFC Bank shares fell 8.5% on Wednesday on Q3 earnings disappointment.
“The third quarter performance seems at par, however, the higher CDR (110%) and lower LCR (110% in 3Q against 126% in 2Q) are cause of concerns. The lower LCR and slower deposit growth may limit NIMs expansion going forward. The reported NIMs of 3.6% (for interest earning assets) came below expectations. The lower LCR, CDR bottleneck and slower deposit growth may squeeze NiMs going forward,” said Ajit Kabi of LKP Securities.
Analysts are confident that while the near term may be weak, the stock will witness recovery sooner than later.
“While the quarter’s disappointment is undeniable, we see no structural red flags in terms of profitability consciousness in loan-segment choices, CASA market share traction and operating cost control – the keys to our central thesis of NIM/RoA expansion to 3.9%/2% by FY26,” said Santanu Chakrabarti of BNP Paribas.
Top buys and sells by mutual funds
Largecaps – Within the largecap pack, MFs bought – Zomato, Tata Steel, Tata Power, GAIL and Axis Bank and sold BEL, NTPC, ONGC, HDFC Bank, Indian Oil.
Midcaps – MFs bought Vodafone Idea, Bank of India, SAIL, GMR Airports, Indian Bank and sold Ashok Leyland, PFC, HPCL, NHPC and REC within the midcap space.
Smallcaps – Among smallcaps, HUDCO, Piramal Pharma, Karur Vysya Bank, J&K Bank, TV18 Broadcast were the top buys. On the other hand, Suzlon Energy, Indiabulls Housing Finance, Delta Corp, NLC India and NMDC Steel were on the sell list.
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(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of The Economic Times)
