Mutual Funds Shift Focus to Banks, Cut Exposure to Commodity and PSU Shares Amid Market Downturn in March 2026

In March 2026, mutual funds shifted their focus to large private banks, increasing their stakes, while reducing their exposure to PSU and commodity-linked stocks.  

This strategic allocation occurred amid an overall market downturn. 

Increased Focus on Private Banks 

As per Prime Infobase data, Mutual funds significantly increased their holdings in prominent private banks during the March 2026 quarter. HDFC Bank's shares saw a rise from 355.30 crore to 393.97 crore, registering an addition of 38.66 crore shares.  

ICICI Bank and Kotak Mahindra Bank also experienced increased mutual fund holdings by 12.70 crore shares and 23.74 crore shares respectively.  

Despite a fall in stock prices, these banks were the major beneficiaries of mutual fund interest. 

Decline in Equity Holdings 

Across sectors, mutual fund equity holdings fell from ₹52.27 lakh crore to ₹46.64 lakh crore, marking a drop of ₹5.62 lakh crore.  

The financial services sector, although still leading, experienced a reduction from ₹16.30 lakh crore to ₹14.58 lakh crore.  

Consumer discretionary and information technology sectors also noted significant declines in equity holdings. 

Selective Buying Beyond Banking 

Apart from banking, mutual funds selectively increased stakes in IT and telecom sectors. 

Infosys and Bharti Airtel saw additional shares acquired, expanding mutual fund portfolios in these large-cap companies.  

Furthermore, incremental buying was observed in Reliance Industries and Bharat Heavy Electricals among others. 

Read More: Mutual Fund NFOs This Week: Axis, Edelweiss, and Others Open for Subscription! 

Reduction in PSU and Commodity Holdings 

In contrast to the banking sector, mutual funds reduced their stakes in PSU and commodity-related companies during the quarter.  

Significant sell-offs were recorded in State Bank of India, with a reduction of 4.31 crore shares, and in firms like Vedanta and Hindalco Industries. This shift highlights the cautious approach towards these sectors amid market challenges. 

Conclusion 

The March 2026 quarter saw mutual funds rebalancing their portfolios by increasing investments in the banking sector while trimming stakes in PSU and commodity-linked stocks. This reallocation decision was influenced by overall market declines, with SBI Mutual Fund maintaining its position as the largest equity investor.  

Disclaimer: This blog has been written exclusively for educational purposes. The securities or companies mentioned are only examples and not recommendations. This does not constitute a personal recommendation or investment advice. It does not aim to influence any individual or entity to make investment decisions. Recipients should conduct their own research and assessments to form an independent opinion about investment decisions. 

Mutual Fund investments are subject to market risks, read all scheme-related documents carefully.