New Delhi: After increasing its overweight position in 2021 and 2022, mutual funds are once again leaning towards India’s largest private sector lender ahead of its merger with housing finance parent HDFC.
Fund managers bought 16.7 million shares of the bank in November, dumping 32.9 shares of nearest rival ICICI Bank, according to mutual fund data.
SBI AMC, HDFC MF, Aditya Birla SunLife, DSP and Edelweiss MF held significant stakes in HDFC Bank last month. It was a new choice for Quant.
On the other hand, shares of ICICI Bank MF, Kotak MF, SBI MF, Tata MF and Nippon India were seen.
Sales have increased 3 times in the last 5 years. On the other hand, HDFC Bank increased by about 75 percent during the period. Even on a year-to-date basis, ICICI Bank is up 22 percent, while its larger peer has returned around 8 percent.
Devon Choksey of KR Choksey Holdings said that if India is to become a $5 trillion economy, strong banks will probably be needed and merged entities such as HDFC and HDFC Bank will be well-performing institutions.
“The AUM of this consolidated entity will be around Rs 50 crore in the period 2025-2026. There is no way one can skip taking this stock into the portfolio,” he said, adding that HDFC is undervalued due to the decline in the holding company.
The market veteran is putting a lead on the rally at 30-35%.
Both bank stocks are among the top bets of most mutual funds. However, ICICI Bank remains the No. 1 choice of most fund managers.
Even for brokers, ICICI Bank seems to have the edge as the stock has received buy recommendations from 37 analysts and just one hold rating. On the other hand, HDFC Bank has 4 hold positions and 29 buy calls.
PMS fund manager Sarab Mukherjea, who has been betting on both HDFC Bank and ICCI Bank, said HDFC Bank’s share price was close to zero in FY00-03 (the four years at the beginning of the not-so-good credit cycle). This discrepancy has been corrected over the next five years, however, with the share price registering a CAGR of 42% during the year 03-08.
“HDFC Bank’s share price performance has remained flat since the end of the fiscal year, so we expect to see a similar pattern now,” Mukherjea said.
Earlier in the month, ICCI Bank’s analyst day led investors to add more volume to their buy calls. While the domestic brokerage is taking technology to a new level and blurring the lines between banking and fintech, global brokerage Jefferies said ICICI Bank is better placed to offer low exposure to risk-adjusted sectors and a manageable share of SME/unsecured retail loans.
(Disclaimer: The advice, suggestions, opinions and views given by the experts are their own. These do not represent the views of The Economic Times)