Mutual Funds Increase Holdings in Private Banks, This Bank Experiences Record Surge

Mutual Funds Boost Stakes in Private Banks, Bank Leads Surge

Mutual funds have significantly increased their shareholdings in top private lenders, driven by promising growth opportunities in the sector. An analysis of data from the top eight banks reveals a rising trend in shareholding from June 2023 to June 2024.

HDFC Bank, the largest private sector bank in India, experienced the most significant increase in mutual fund shareholding, which surged from 17.6 percent to 24.83 percent—a rise of 723 basis points. Kotak Mahindra Bank followed, with mutual fund shareholding climbing from 9.5 percent in June 2023 to 16.52 percent in June 2024, marking a 702 basis point increase. IndusInd Bank saw mutual funds raise their stake by 5.93 percent to 19.91 percent over the year, a 593 basis point change. In contrast, ICICI Bank saw a slight reduction in mutual fund shareholding by 0.04 percent, leaving mutual funds with a 29.18 percent stake as of June 2024.

This trend coincided with a rise in the share prices of these banks. For example, Axis Bank’s share price jumped from Rs 987.54 on June 30, 2023, to Rs 1,266.46 on June 28, 2024. Federal Bank’s shares increased from Rs 126.5 to Rs 177.09 during the same period.

Except for Kotak Mahindra Bank and HDFC Bank, all private bank shares traded positively. This increased interest from mutual funds also paralleled a surge in the Nifty Private Bank index, which rose from 22,953.30 points to 26,144.22 points—a gain of 3,190.92 points.

Despite mixed results in their latest quarterly reports, the private banking sector remains robust, drawing considerable interest from investors. For instance, a July 12 report by IIFL Securities revealed that mutual funds purchased HDFC Bank shares worth over Rs 42,000 crore in the first half of 2024, significantly higher than in previous years.

In the first quarter of fiscal 2025, private sector banks collectively reported a 23 percent year-on-year increase in net profit, despite pressures on net interest margins. Banks faced seasonal challenges in Q1FY25 due to heatwaves and stress on agricultural portfolios. However, they expect growth and strong trends across various parameters moving forward.

India’s stock market and finance sector continue to thrive, with private banks at the forefront of this growth trajectory.