In a significant move during May, domestic mutual funds collectively invested approximately Rs 25,000 crore into three of India's market heavyweights: ICICI Bank Ltd, HDFC Bank, and Reliance Industries Ltd (RIL). This substantial buying spree has elevated the combined value of mutual fund holdings in these three stocks to Rs 7,37,011 crore by the end of May, as per data from PRIME Database.
ICICI Bank Sees Strong Inflow
ICICI Bank emerged as a top pick, attracting Rs 10,528.32 crore in mutual fund buying. This pushed mutual fund stakes in the bank from 28.77 percent in April to 29.94 percent by May's close. Their total investment in ICICI Bank alone stood at Rs 2,69,365.61 crore.
Systematix, a brokerage firm, maintains a 'Buy' rating on ICICI Bank, setting a target price of Rs 1,650, citing the bank as its top banking sector choice.
HDFC Bank Attracts Funds Amidst Dip
Despite a period of decline, HDFC Bank also saw considerable mutual fund interest, with net buying reaching Rs 7,447.69 crore. Mutual fund stakes in HDFC Bank increased from 24.55 percent to 25.19 percent month-on-month. By the end of May, mutual funds held HDFC Bank shares worth Rs 2,88,678 crore.
Nomura analysts have reiterated a 'Buy' rating on HDFC Bank with a target of Rs 940. They noted that the bank's FCNR (Foreign Currency Non-Resident) deposits could help address balance sheet concerns faster than expected. While acknowledging near-term investor caution due to CEO succession discussions and recent governance reports, Nomura views the franchise as intact, with a favorable liability outlook and the stock trading at decade-low multiples, presenting a favorable risk-reward scenario.
Reliance Industries: Downside Priced In?
Reliance Industries Ltd (RIL) also attracted significant mutual fund attention, with net buying of Rs 7,065.84 crore, even as its shares experienced a 7.7 percent decline during May. Mutual funds' total holdings in RIL amounted to Rs 1,78,967.88 crore at May end.
Equirus Securities recently upgraded RIL to 'LONG' from 'ADD', setting a September 2027 target of Rs 1,586. The firm believes that the downside risks for RIL shares are largely priced in, with emerging catalysts for a re-rating. These include improving profitability in its O2C (Oil to Chemicals) segment, value unlocking in Jio, resilient growth in its Retail division, and anticipated contributions from new energy projects in the coming quarters. Equirus highlighted the favorable risk-reward equation given the stock's medium-term underperformance and valuation near post-COVID lows.