HDFC Bank Saw Mixed January As Mutual Funds Cushioned FII Selloff, Says Nuvama

In January, HDFC Bank Ltd. was a key addition among mutual funds, which bought Rs 23,700 crore worth of Indian stocks during the month, according to Nuvama Alternative and Quantitative Research. The lender saw inflows of Rs 12,900 crore.

At the same time, foreign institutional investors sold Rs 28,500 crore worth of stocks in Indian secondary market. This dynamic reflects a noteworthy resilience and positive sentiment among domestic investors, in the face of external selling pressures, Nuvama said in a Feb. 13 note.

"The market's relentless surge is fueled by India's steady economic growth, a favorable political landscape, and unwavering faith from retail/HNI participants," it said.

Key additions across mutual funds also included Reliance Industries Ltd. and Kotak Mahindra Bank Ltd., Nuvama said.

ICICI Bank Ltd. was the most sold stock as mutual funds pulled out Rs 3,470 crore. Infosys Ltd., NTPC Ltd., Bharti Airtel Ltd., and Tata Motors Ltd. were also among the most sold stocks.  

Foreign portfolio investment outflows in January can be linked to people's disappointment with HDFC Bank Ltd. Financial services recorded the biggest foreign outflows in January as overseas investors turned sellers of Indian stocks, said Helios Capital Asset Management (India) Pvt. Founder Samir Arora.

Overseas institutional investors offloaded $3,096 million, or Rs 25,744 crore worth of stocks in January. This is the highest outflow in a year, National Securities Depository Ltd. data showed. The overall market experienced a positive inflow of Rs 5,000 crore. Only the financial services sector saw a Rs 30,000-crore outflow, which resulted in a change in the overall flows, according to the data.

Large-caps recorded an inflow of Rs 13 billion compared to an outflow of Rs 3 billion, Nuvama said.

"Domestic fund managers seem increasingly inclined towards deploying in large-caps, given limited valuation comfort in the SMID sector," the note said.

In the mid-cap segment, notable additions to the portfolio include Jubilant FoodsWorks Ltd. (Rs 710 crore), Voltas Ltd. (Rs 670 crore), Jyoti CNC Automation Ltd. (IPO) (Rs 500 crore), and Star Health and Allied Insurance Co. (Rs 460 crore).

Key reductions were observed in Zee Entertainment Enterprises Ltd. (Rs 950 crore), Navin Fluorine International Ltd. (Rs 500 crore), Chambal Fertilisers and Chemicals Ltd. (Rs 450 crore), and Bandhan Bank (Rs 410 crore), according to the note.

In the small-cap segment, notable additions to the portfolio include Medi Assist Healthcare Services Pvt. (IPO) (Rs 460 crore), Tips Industries Ltd. (Rs 390 crore), and Pricol Ltd. (Rs 260 crore). Key reductions were observed in Vaibhav Global Ltd. (Rs 150 crore), VIP Industries Ltd. ( Rs 150 crore), and DCB Bank Ltd. ( Rs 130 crore), the note said.