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The weight of private banks in the portfolios of domestic mutual funds has gone up to a record high of 20.8 per cent in September, 2019, according to Motilal Oswal Securities. HDFC Bank & ICICI Bank dominate the pack for 14 of the 20 top MFs.

The flight to safety and diminishing earnings viability amidst an economic slowdown have prompted domestic mutual funds to raise allocation to select private banks and consumer stocks. The weight of private banks in their portfolios rose to a record high of 20.8% in September 2019, according Motilal Oswal Securities. It was 470 bps higher than the year-ago level. HDFC BankNSE 0.74 % and ICICI BankNSE -0.64 % are the top two holdings of the 14 out of 20 leading mutual funds.

The holding in HDFC Bank and ICICI Bank constitutes 5-11% of the total equity assets of major mutual funds. Amid rising demand from investors, HDFC Bank has emerged as the largest market-cap gainer among global banks with an increase of $25 bn in a year, according to Bloomberg.

Private banks have a weight of 26.8% and 21.6% in the Nifty 50 and the BSE 200, respectively.

The domestic mutual fund holding in consumer stocks rose to 8.4% in September 2019 — a multi-quarter high.

Nestle’s inclusion in the Nifty too contributed to the higher allocation. However, despite ramp-up in allocation, local funds are underweight 300 bps in consumer stocks compared with the consumer stock weight in the Nifty.

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