Impact of HDFC-HDFC Bank merger on mutual fund investors

Impact of HDFC-HDFC Bank merger on mutual fund investors

by 5paisa Research Team Last Updated: 2022-04-06T15:33:08+05:30

The HDFC-HDFC Bank merger might lead to some sell-off from mutual funds. read on to find out more.

HDFC Bank and HDFC announced a merger on Monday. However, this might lead to a sell-off from a few mutual funds. Why would mutual funds sell? This is because mutual funds cannot invest more than 10% in a particular stock. However, an exception to this is index funds, Exchange Traded Funds (ETF) and sectoral funds. So, let us now look at the list of funds where the allocation towards the HDFC twins is collectively above 10%.

Fund Name 

% of AUM HDFC Bank 

% of AUM HDFC 

Collective % of AUM 

HDFC Housing Opp Fund 

9.22 

7.57 

16.79 

Motilal Oswal Focused 25 Fund 

8.69 

7.66 

16.35 

Indiabulls Blue Chip Fund 

8.81 

6.93 

15.74 

IDBI Focused 30 Equity Fund 

8.21 

6.01 

14.22 

Quantum Long Term Equity Value Fund 

6.13 

7.76 

13.89 

Quantum Tax Saving Fund 

6.09 

7.6 

13.69 

Sundaram Large Cap Fund 

7.92 

5.36 

13.28 

Mahindra Manulife Large Cap Pragati Yojana 

7.82 

5.29 

13.11 

ICICI Pru Bluechip Fund 

7.69 

5.26 

12.95 

Tata Equity P/E Fund 

7.73 

5.06 

12.79 

Motilal Oswal Flexi Cap Fund 

7.21 

5.28 

12.49 

SBI Retirement Benefit Fund-Aggressive Plan 

7.35 

4.99 

12.34 

Sundaram Services Fund 

7.57 

4.66 

12.23 

Nippon India Large Cap Fund 

7.76 

4.44 

12.20 

IDFC Large Cap Fund 

7.83 

4.34 

12.17 

SBI BlueChip Fund 

8.25 

3.74 

11.99 

ICICI Pru Retirement Fund-Pure Equity Plan 

8.27 

3.7 

11.97 

SBI Tax advantage Fund 

6.75 

5.03 

11.78 

Baroda Large Cap Fund 

7.48 

4.29 

11.77 

HDFC Top 100 Fund 

7.19 

4.55 

11.74 

Baroda BNP Paribas ELSS Fund 

9.23 

2.36 

11.59 

Baroda BNP Paribas Large Cap Fund 

7.76 

3.7 

11.46 

SBI Magnum Equity ESG Fund 

5.20 

6.25 

11.45 

JM Large Cap Fund 

7.16 

4.21 

11.37 

HSBC Large Cap Equity Fund 

8.99 

2.35 

11.34 

Indiabulls Equity Hybrid Fund 

5.98 

5.16 

11.14 

Aditya Birla SL Business Cycle Fund 

8.54 

2.59 

11.13 

Nippon India Tax Saver (ELSS) Fund 

7.54 

3.49 

11.03 

UTI Mastershare 

7.18 

3.84 

11.02 

Aditya Birla SL Intl. Equity Fund-B 

6.83 

4.17 

11.00 

Canara Rob Bluechip Equity Fund 

8.03 

2.95 

10.98 

IDBI India Top 100 Equity Fund 

7.26 

3.64 

10.90 

Nippon India Quant Fund 

6.43 

4.4 

10.83 

Baroda BNP Paribas Business Cycle Fund 

5.94 

4.81 

10.75 

ICICI Pru ESG Fund 

5.96 

4.77 

10.73 

UTI Equity Savings Fund 

3.40 

7.32 

10.72 

Aditya Birla SL Focused Equity Fund 

8.05 

2.65 

10.70 

Taurus Largecap Equity Fund 

4.59 

5.97 

10.56 

Shriram Hybrid Equity Fund 

5.79 

4.68 

10.47 

Axis Bluechip Fund 

7.11 

3.01 

10.12 

SBI Retirement Benefit Fund-Aggressive Hybrid Plan 

6.19 

3.93 

10.12 

As you can see from the above table, there are around 41 funds having allocations greater than 10%. This means that these funds would need to re-align their portfolio to adhere to the capping. However, will this affect the investors? Let’s find out.

Impact of HDFC-HDFC Bank merger on MF investors

If we look at the total possible sell-off from the above listed mutual funds then it would amount to Rs 3,408 crore based on the Assets Under Management (AUM) as of February 2022. And the post-merger market capitalization of HDFC Bank would be around Rs 14 lakh crore. Hence, with such a massive market capitalization, absorbing the sell-off from mutual funds won’t be that difficult. Therefore, investors in HDFC Bank stocks need not worry about the sell-off from mutual funds. 

However, speaking about the impact on mutual fund investors, post-merger the allocation in the index would be around 14%. This would potentially increase the portfolio concentration for index funds, ETFs, focused funds and some of the less diversified large-cap funds. Therefore, investors carrying conservative to moderate risk profiles can consider investing in diversified equity funds such as flexi-cap funds rather than index funds. 


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