Quant MF raises wager on HDFC Bank, exposure increases across schemes

Quant Mutual Fund (MF), one of the few fund houses to run a significant underweight position in private banks, has raised its allocation towards HDFC Bank.

The private lender is now among the top two holdings in most of the schemes.

Reliance Industries and Jio Financial Services are among the top holdings in most schemes.

Banks have the highest weight in bluechip indices Nifty50 and Sensex, with HDFC Bank accounting for a large portion.

As a result, the stock’s underperformance was a major drag on the performance of these indices.

Most largecap and banking sector funds have underperformed the benchmark indices in the previous two of the three financial years owing to the challenges in raising deposits and the challenges emerging out of the merger between HDFC Bank and the parent HDFC.

In FY24, the bank declined 10 per cent vis-a-vis nearly 29 per cent rise in Nifty50.

HDFC Bank is catching up on its underperformance. One of the triggers, according to Nuvama Institutional Equities, is the expectation of an increase in its weight in MSCI Standard Index in the August review.

"The Street is eagerly awaiting HDFC Bank's June 24 shareholding. The critical number to monitor is the FII holding dropping below the 55 per cent mark. According to base case calculations, the weight increase should lead to approximately $3.3 billion in inflows. If the shareholding favours a weight increase (which has a higher probability), the stock could see a further 10-15 per cent jump until the official announcement in August. In case of an unfavorable outcome, the stock could cool off to around Rs 1,600, at which point we could see good interest from domestic funds," the brokerage said.