Is HDFC Bank a safety net for mid-cap and small-cap funds? Not always
Largecap stocks held by mid-cap and small-cap funds tend to cushion the fall whenever the market corrects. However, it is not a cause of concern for the long term investors
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.
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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]
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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%
