Mutual Funds Offload Over ₹8,200 Crore Worth of HDFC Bank Shares in August

In August, mutual funds sold approximately 5.06 crore shares of HDFC Bank, valued at over ₹8,200 crore, in a significant shift from the preceding seven months of consistent buying. This marked the first sell-off by mutual funds after a long buying spree that saw net purchases of shares worth ₹45,000 crore between January and July.

Top Mutual Fund Sellers

Several leading mutual funds reduced their exposure to HDFC Bank during the month. Kotak Mahindra Mutual Fund emerged as the largest seller, offloading around 2.56 crore shares valued at ₹4,188 crore. Quant Mutual Fund followed, selling its entire stake of 1.73 crore shares worth ₹2,827 crore. Other notable sellers included:

• SBI Mutual Fund: Sold 68 lakh shares valued at ₹1,110 crore.
• Aditya Birla Sun Life Mutual Fund: Sold shares worth ₹718 crore.
• Invesco Mutual Fund: Sold shares worth ₹604 crore.
• Axis Mutual Fund: Sold shares worth ₹250 crore.
• Tata Mutual Fund: Sold shares worth ₹233 crore.

Buying Activity

Despite the sell-off, some mutual funds took the opportunity to increase their holdings in HDFC Bank. ICICI Prudential Mutual Fund was the top buyer, acquiring 1.19 crore shares worth ₹1,947 crore. Other buyers included UTI Mutual Fund, which bought shares worth ₹251 crore, and Nippon India Mutual Fund, which acquired shares worth ₹238 crore.

Overall, 41 mutual funds held about 153.87 crore shares in HDFC Bank valued at ₹2.51 lakh crore in August, down from ₹2.59 lakh crore worth of shares in July.

Factors Behind the Sell-off

The reasons for this large-scale sell-off by mutual funds remain unclear. HDFC Bank's stock has underperformed since the start of 2024, dropping by 2.5% compared to a 7% rise in the Nifty Bank index. In contrast, peers such as State Bank of India rose 23%, ICICI Bank climbed 26%, and Axis Bank gained 10% during the same period.

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In August, MSCI announced an increase in HDFC Bank's weightage in its Global Standard Index in two stages. The Foreign Inclusion Factor (FIF) for HDFC Bank will rise from 0.37 to 0.56, indicating that 56% of the bank's shares will be available for foreign investment. This change will boost HDFC Bank's 'foreign room' to over 25%, enabling its inclusion in MSCI's India Index after the August review. Due to HDFC Bank's significant weight in the MSCI India Index, an initial adjustment factor of 0.75 will be applied. If the foreign portfolio investment headroom remains above 20%, the factor could increase to 1.0 in subsequent adjustments.

Market Impact and Outlook

The recent sell-off by mutual funds raises questions about market sentiment toward HDFC Bank, especially considering its underperformance relative to peers. Analysts are watching closely to see if the changes in MSCI's weightage will positively impact the bank's share price in the coming months.

The adjustments by MSCI and the rebalancing by mutual funds may create opportunities for investors, depending on the bank's performance and broader market conditions.

Source: MoneyControl