Rs 5.50 lakh crore! Here are 5 biggest mutual funds’ bets. Key details

Where do you put one-fourth of your money in the domestic equity market? The latest mutual fund data holds a cue for you. Asset management companies in India held shares worth over Rs 5.69 lakh crore in the top five listed companies— ICICI Bank, HDFC Bank, Infosys, Reliance Industries and State Bank of India—on November 30. Their exposure in these stocks stood at nearly 25 per cent of the total equity asset under management (AUM).

Private sector lender ICICI Bank is the biggest bet of mutual funds. They together owned 23.43 per cent of the total share capital as of November 30, whose market value was around Rs 1,55,694.36 crore, as per Prime Database. The figure stands at 6.69 per cent of the total equity asset that fund managers managed at the end of November. Brokerage YES Securities has a ‘Buy’ rating on ICICI Bank with a target price of Rs 1,210, showing an upside of over 30 per cent against the market price of Rs 921 on December 14.

HDFC Bank is next on the list, which accounted for 5.78 per cent of the total equity asset managed by mutual funds. At the market value of Rs 1,34,628.83 crore, mutual funds owned 15.01 per cent of the total share capital as of November 30. Anand Rathi Share and Stock Brokers has set a target price of Rs 1908 for HDFC Bank. Shares of the company closed at Rs 1661.60 on December 15.

“HDFC Bank already had a huge opportunity with the under-penetration of banking services in the country. The proposed merger adds an entirely different dimension to the future. We believe that the runway is huge. HDFC Bank’s earnings trajectory remains on track with continued growth in retail. The ongoing expansion of the branch network and cards business, coupled with the merger, is expected to aid long-term growth. Nevertheless, the bank’s long-term outlook remains positive,” the brokerage said.

Commenting on the overall banking sector, Aditya Sood, Fund Manager, InCred Multicap Portfolio said, “The outlook on lending financials has improved and early signs of corporate credit growth ex of working capital finance are visible. This coupled with good asset quality has led to an outperformance and the asset quality has improved meaningfully.”

In the case of IT major Infosys, mutual funds owned 15.34 per cent of share capital, which stood at Rs 1,05,520.37 crore. Infosys accounted for 4.53 per cent of the total asset mutual funds managed at the end of November.

Global brokerage firm Nomura is positive on Infosys with a target price of Rs 1,900. “Continued participation in deal wins and net new deal wins up 47 per cent year-on-year (YoY) in H1FY23F give the company an edge on growth outperformance against its large-cap peer set,” Nomura said.

Energy-to-telecom major Reliance Industries (RIL) accounted for 4.40 per cent of the total equity asset under management. Mutual funds held a 5.54 per cent stake in the company worth Rs 1,02,453.64 crore as of November 30.

Ashika Stock Broking in November maintained a ‘Buy’ rating on RIL with a target price of Rs 2,850. “We have a positive view on Reliance Industries given its strong balance sheet, management pedigree and global tie-ups,” the brokerage said.

State Bank of India is the fifth top pick of mutual funds. Mutual funds’ 13.16 per cent stake in the lender stood at Rs 70,779.23 crore on November 30. The country’s biggest lender in terms of assets accounted for 2.75 per cent of the mutual funds' total equity AUM.

While sharing its view on the banking sector, IIFL Securities in a report said that banks reported strong core performance in Q2FY23, with a pick-up in loan growth, sharp margin expansion, healthy fee traction and sustained improvement in asset quality.

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