Weight issues in HDFC merger to create fresh trouble for large-cap funds

Active fund managers will be forced to remain underweight on the stock; Could have a bearing on their performance

The impending merger between Housing Development Finance Corporation (HDFC) with HDFC Bank may create challenges for large-cap fund managers, most of whom are already grappling to match the returns generated by their benchmarks.

The combined weight following the merger in the benchmark Sensex and Nifty 50 indices is likely to be much higher than permissible limits for active mutual fund (MF) schemes. This could have a bearing on the performance of large-cap funds if HDFC Bank shares outperform the markets, as the schemes will be forced to remain underweight on the stock to adhere to the single-stock cap.

Mutual fund