Mutual Funds Raise Allocation to Private Banks in June 2026; HDFC Bank, ICICI Bank Lead Buying

Mutual funds increased their allocation to private sector banks in June, reversing a recent decline in exposure, according to a Motilal Oswal Financial Services (MOSL) report cited by Moneycontrol. The higher allocation comes amid improving credit growth, stable asset quality and attractive valuations, prompting fund managers to turn more positive on the sector. 

The weight of private banks in mutual fund portfolios rose 60 basis points month-on-month to 17.9% in June. The increase followed a recovery in banking stocks after the sharp correction witnessed in March. 

HDFC Bank and ICICI Bank Lead Mutual Fund Buying 

According to the Motilal Oswal Financial Services report, mutual funds purchased 3.18 crore shares of HDFC Bank and 63.5 lakh shares of ICICI Bank during June. 

The report also noted that the value of mutual fund holdings in Axis Bank increased by ₹4,630 crore. Although the number of shares held declined by 9.7%, the value of holdings rose due to appreciation in the stock price. 

Despite the increased allocation, private banks remain under-owned compared with their 19.4% weight in the BSE 200 Index, as mutual funds allocated 17.9% to the sector. 

Private Banks Rebound After March Correction 

The Nifty Private Bank Index gained 6.09% in June after falling 15.63% in March. The index had rebounded 8.85% in April, reflecting improving investor sentiment. 

According to the report, mutual fund exposure to private banks had declined from 18.8% in April 2025 to 17.3% in April 2026, making June's increase a reversal of that trend. 

Read More: Income Tax Notice: How to Check if It's Genuine Before You Respond 

PSU Banks Continue to Remain Under-Owned 

The Motilal Oswal Financial Services report also showed that PSU banks remained under-owned, with mutual funds allocating 3.9% to the sector. 

While PSU banks have delivered strong returns over the past year, some fund managers believe much of the rerating has already taken place. Others expect some PSU banks to continue benefiting from healthy credit growth and improving margins. 

Conclusion 

Mutual funds increased their allocation to private sector banks in June, led by HDFC Bank and ICICI Bank, according to a Motilal Oswal Financial Services report cited by Moneycontrol. The report highlighted improving credit growth, healthy asset quality, and attractive valuations as key factors supporting the sector. 

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