Is HDFC Bank a safety net for mid-cap and small-cap funds? Not always

The sharp single-day decline in the stock of HDFC Bank of over 8 percent on January 17 hit all those mutual fund (MF) schemes that have shares of the bank. Index funds tracking the Nifty 50 saw a single-day drop in their NAV by 2%, while the banking sector funds posted a loss of up to 3.5% on January 17. A total 532 equity-oriented MF schemes hold HDFC Bank shares in their portfolios, as of December 31, 2023. Of these, 422 are actively managed.

The allocation towards the stock of HDFC Bank by the overall Indian mutual fund industry stood at Rs 2.18 trillion, comprising about 7% of the overall equity AUM of Rs 31.5 trillion as of December 2023. Actively managed equity funds had a lion’s share of about 64% in it. But it’s not just the large-cap funds that have HDFC Bank shares. Quite a few small- and mid- cap funds also have the bank’s shares. Apart from their 65% of mandated allocation, mid-cap and small-cap funds have a leeway to allocate to large-cap stocks. Large-cap stocks tend to cushion the fall whenever the market corrects. Eight mid-cap funds and four small-cap funds held the exposure to the HDFC Bank as of December 2023. They registered a single-day loss of -0.6% to -1.4% on January 17. The allocation to the HDFC Bank was likely to contribute to the fall in the NAV of these funds on the day.
Here are the top mid-cap and small-cap funds that hold exposure to the stock of HDFC Bank. [Data as of December 2023. Source: ACEMF]

PGIM India Midcap Opp Fund
Category: Mid Cap Fund
One day return as of January 17, 2024: -1.2%
Portfolio exposure to the stock: 2.4%

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Canara Rob Mid Cap Fund
Category: Mid Cap Fund
One day return as of January 17, 2024: -0.6%
Portfolio exposure to the stock: 2.2%

Franklin India Prima Fund
Category: Mid Cap Fund
One day return as of January 17, 2024: -1.2%
Portfolio exposure to the stock: 2.1%

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Nippon India Small Cap Fund
Category: Small Cap Fund
One day return as of January 17, 2024: -0.9%
Portfolio exposure to the stock: 1.9%

Franklin India Smaller Cos Fund
Category: Small Cap Fund
One day return as of January 17, 2024: -1%
Portfolio exposure to the stock: 1.6%

Mirae Asset Midcap Fund
Category: Mid Cap Fund
One day return as of January 17, 2024: -1.4%
Portfolio exposure to the stock: 1.5%

Sundaram Small Cap Fund
Category: Small Cap Fund
One day return as of January 17, 2024: -1%
Portfolio exposure to the stock: 1.5%

Axis Midcap Fund
Category: Mid Cap Fund
One day return as of January 17, 2024: -0.9%
Portfolio exposure to the stock: 1.5%

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Nippon India Growth Fund
Category: Mid Cap Fund
One day return as of January 17, 2024: -1.1%
Portfolio exposure to the stock: 1.5%

Quantum Small Cap Fund
Category: Small Cap Fund
One day return as of January 17, 2024: -0.8%
Portfolio exposure to the stock: 1.4%

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