Quant Mutual Fund (MF) schemes are expected to have sold all of their HDFC Bank shares, months after making significant investments in the country's largest private lender. The stock, which was among the top two holdings in the majority of its schemes at the end of June, is currently not even in any of the top ten.

Quant MF has dominated the equity scheme performance charts in recent years, thanks to its successful high-conviction investments. Its programs benefited from the upward trend of Adani equities. After the Hindenburg attack on Adani shares in early 2023, the investment firm moved its allocation to Reliance Industries and Jio Financial.

The investment proved to be a crucial driver of its schemes' performance during the previous year. However, the fund house's performance has declined in recent months. The drop in performance coincides with the regulator's examination into front-running potential in the fund house.

HDFC Bank, the third largest firm by market capitalization with a huge free float, has the highest weight in largecap, banking, and financial services indices. Most diversified active equity funds have a significant exposure to the stock.

Except for the brief period of May to July, Quant MF is one of the few fund houses that has had no or very little exposure to HDFC Bank in recent years. Despite its appealing valuation, HDFC Bank has failed to deliver returns to shareholders for quite some time. 

Its long period of underperformance was expected to end in July, with anticipation that its increased weight in the MSCI index would lead to robust buying by global passive funds. However, MSCI's decision to gradually boost its weight proved to be a dampener.