Impact of HDFC merger on our fund recommendations

HDFC and HDFC Bank, the two giants of the Indian markets, have merged to form a finance goliath. Individually too, both the stocks had a presence in the list of top 10 companies by market cap. And now that HDFC twins have merged to become HDFC Bank , it has become India's second biggest company and the fourth largest bank in the world! Given their track record of consistent growth, it's not surprising that the HDFC twins have been a favourite of mutual funds, particularly in the large-cap category. So, now that they have merged, here is an analysis of its impact on our recommended funds. Active funds As per SEBI rules, actively-managed mutual funds cannot hold more than 10 per cent of their assets in a single stock. This is done to keep the portfolio concentration risk in check. Now, since many funds held both the stocks, the combined exposure to HDFC-HDFC Bank surpassed the 10 per cent limit in some cases. There are 40 such mutual funds to be precise. But within our recommendation set ('Best Buy' and 'Buy' funds list), the impending impact is likely in the case of these seven funds only: Funds with over 10% exposure to 'HDFC Twins'