Mutual Funds Offload HDFC Bank Shares Worth ₹8,200 Crore Amid MSCI Index Changes

In August, top mutual fund houses sold a large portion of their shares in HDFC Bank, amounting to around ₹8,200 crore. Data shows that 23 out of 41 funds reduced their stakes, including major names like Kotak Mahindra Mutual Fund, Quant Mutual Fund, and SBI Mutual Fund.

This marks the first time in 8 months that mutual funds have sold shares of HDFC Bank, with around 5.06 crore shares sold in August. Previously, from January to July, mutual funds had been buying, with net purchases totalling ₹45,000 crore.

Kotak Mahindra Mutual Fund sold about 2.56 crore shares of HDFC Bank, valued at ₹4,188 crore. Quant Mutual Fund sold its entire holding, offloading 1.73 crore shares worth ₹2,827 crore. SBI Mutual Fund sold 68 lakh shares, amounting to ₹1,110 crore. Other big sellers included Aditya Birla Sun Life MF (₹718 crore), Invesco Mutual Fund (₹604 crore), Axis Mutual Fund (₹250 crore), and Tata Mutual Fund (₹233 crore).

However, some funds remain positive about HDFC Bank, India’s largest bank by market cap. ICICI Prudential Mutual Fund led the buying, purchasing 1.19 crore shares worth ₹1,947 crore, followed by UTI Mutual Fund (₹251 crore) and Nippon India Mutual Fund (₹238 crore).

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

The reason for the large-scale selling by some mutual funds is unclear. HDFC Bank’s stock did not perform well in 2024, falling by 2.5%, while the Nifty Bank index gained 7%. In contrast, competitors like State Bank of India rose by 23%, ICICI Bank increased by 26%, and Axis Bank grew by 10% this year.

In August, MSCI announced it would increase HDFC Bank’s weight in its Global Standard Index in 2 phases. The Foreign Inclusion Factor (FIF) for HDFC Bank will rise from 0.37 to 0.56, meaning 56% of the bank’s shares will be open to foreign investment.

This change increases HDFC Bank’s ‘foreign room’ to over 25%, allowing it to be included in MSCI at its full market cap weight. The first adjustment will take place after the August index review. An initial factor of 0.75 will be applied due to the bank’s large MSCI India Index weight. If foreign portfolio investment remains above 20%, the factor will rise to 1.0 during the November review.

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Disclaimer: This blog has been written exclusively for educational purposes. The securities mentioned are only examples and not recommendations. It is based on several secondary sources on the internet and is subject to changes. Please consult an expert before making related decisions.