HDFC Bank Gains Traction: Mutual Funds Invest Rs 13,850 Crore in January, While Shedding Holdings in Infosys, NTPC, Bharti Airtel, and Tata Motors

In January, mutual funds focused on HDFC Bank, acquiring shares worth Rs 13,850 crore following a substantial decline due to disappointing earnings.

Mutual funds purchased approximately 8.83 crore HDFC Bank shares in January, contrasting with the sale of about 1.53 crore shares in the December quarter.

By January 2024, mutual funds held around 136.26 crore HDFC Bank shares, up from 127.44 crore in December 2023. However, the value of these shares decreased from Rs 2.18 lakh crore to Rs 1.99 lakh crore during this period, as per Prime database data.

Out of 40 mutual funds invested in HDFC Bank, 27 increased their holdings in January, while 13 reduced their stakes. ICICI Prudential Mutual Fund led the buyers with the highest purchase of Rs 3,933 crore, followed by HDFC Mutual Fund and Kotak Mutual Fund at Rs 2,981 crore and Rs 2,625 crore, respectively.

SBI Mutual Fund emerged as the largest stakeholder in HDFC Bank in January, holding 36.18 crore shares worth Rs 52,921 crore. HDFC Mutual Fund and ICICI Prudential Mutual Fund followed with 16.2 crore and 13.69 crore shares, valued at Rs 23,686 crore and Rs 19,990 crore, respectively. Other significant holders included UTI Mutual Fund, Nippon India Mutual Fund, Kotak Mahindra Mutual Fund, and Mirae Asset Mutual Fund.

The sharp decline in HDFC Bank’s valuation brought it to 2.3 times the one-year forward book value, compared to the five-year average of 3.1x. Jefferies, maintaining a ‘buy’ rating with a Rs 2,000 target price, anticipates an EPS pickup from Q1FY25, considering the 2 percent year-on-year decline in the December quarter. The brokerage emphasized that stock price compounding and valuation re-rating depend on improving growth in core EPS.

Apart from HDFC Bank, mutual funds’ top picks included Reliance Industries, Kotak Mahindra Bank, Maruti Suzuki India, Larsen & Toubro, and State Bank of India, with investments ranging from Rs 1,460 to Rs 3,139 crore. ICICI Bank led in sales with MFs withdrawing Rs 3,377 crore, while Infosys, NTPC, Bharti Airtel, and Tata Motors were also heavily sold.