As the merger of HDFC with HDFC Bank inches closer, mutual funds (MFs) have to offload shares worth ₹4,500 crore in HDFC Bank post-merger to meet the SEBI cap of 10 per cent exposure to single stock.
The merger of HDFC with HDFC Bank is close to becoming reality with most regulators giving their nod. Being the top blue-chip company, almost all the MF schemes have a holding in HDFC twins.
Post the merger, MF schemes have to tweak their portfolio to ensure that they do not breach the 10 per cent single-stock exposure cap levied by SEBI.
Though analysts do not see big impact on the stock price, both the stocks are already facing the heat. HDFC Bank has been on steady decline from ₹1,637 logged on May 29 and a close ₹1,582 on Thursday.
Similarly, HDFC has been on a downtrend from ₹2,691 on May 29 to ₹2,619 on Thursday amid huge volatility.
In all, there are about 60 MF fund schemes that hold shares worth ₹4,500 crore in excess of SEBI prescribed limits. Post the merger, SEBI will give one-month time to readjust the portfolio, in case the exposure exceeds the single-stock limit.
Of the 60 funds, Mirae Asset Large Cap has the largest excess exposure of ₹1,200 crore, while HDFC Top 100 and Axis Bluechip have exposure of ₹710 crore and ₹460 crore, according to the Morningstar India data.
Short-term pressure
Sonam Srivastava, Founder of investment advisory firm Wright Research, said the development could create short-term pressure on the HDFC Bank share price, which has already seen a downward trend.
While offloading of these shares in desperation could impact the portfolio negatively, the loss will be limited as both HDFC Bank and HDFC are most liquid with high demand, she said.
The selling might also open up opportunities for retail and other domestic investors to buy at lower prices. Despite the short-term pressure, wider market impact is not anticipated, limiting the need for regulatory intervention, she added.
VK Vijayakumar, Cheif Investment Strategist at Geojit Financial Services, said HDFC Bank stock has been weak even in this resilient market due to selling by MFs and this trend will continue.
The fall in stock price is an opportunity for retail investors to buy it and another 3 per cent decline will make the valuation attractive, he added.
The long-term impact on share price depends on various factors, including market conditions and the performance of the merged entity, said Srivastava.