HDFC Bank sees mutual funds pick up Rs 13,850 crore shares in January

Mutual funds seized the opportunity after a January dip in HDFC Bank stock, acquiring shares worth Rs 13,850 crore amid poor earnings. The funds bought around 8.83 crore shares of the lender in January after selling around 1.53 crore shares in the December quarter.

As of January 2024, mutual funds held around 136.26 crore HDFC Bank shares, up from 127.44 crore in December 2023. The value of these shares decreased from Rs 2.18 lakh crore to Rs 1.99 lakh crore in this period, according to Primedatabase data.

Out of 40 mutual funds invested in HDFC Bank, 27 stepped up their holdings in January, while 13 chose to dilute part of 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.

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

HDFC Bank shares took a hit in January with declined over 14.4 percent after disappointing deposit and liquidity metrics in the December quarter earnings, despite a net profit above consensus estimates due to one-off items. The bank's net interest margin of 3.4 percent in the quarter fell short of the expected 3.6 percent.

The sharp correction brought the valuation for HDFC Bank to 2.3 times the one-year forward book value, compared to the five-year average of 3.1x. Jefferies, while maintaining a 'buy' rating with a Rs 2,000 target price, anticipates an EPS pickup from Q1FY25, as the December quarter saw a 2 percent on-year decline. The brokerage emphasised that stock price compounding and valuation re-rating hinge on improving growth in core EPS.

Apart from HDFC Bank, top picks for mutual funds 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.

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