This stark divergence highlights the growing polarization in large-cap positioning, creating risks of sharp corrections in overvalued stocks and opportunities for outperformance among underserved heavyweights if sentiment changes.
Where it’s crowded: Most overowned stocks
According to recent mutual fund data analyzed by Ilara Securities, nearly 25% of all equity scheme inflows this year have flowed into just six stocks, reflecting the overwhelming consensus among fund managers:
Axis Bank, Maruti Suzuki, Eternal Ltd, State Bank of India, ICICI Bank, SBI Life Insurance are among the most owned large caps. Axis Bank, for example, is holding 52% more mutual funds than its weight in benchmark indices, a sign of strong institutional selection and crowding.
Maruti Suzuki and Eternal are equally overweight, showing a clear alignment among the top mutual funds on their prospects.
This crowding effect is a double-edged sword: while consensus may be driven by earnings strength and visibility, it also means these stocks could face sharper outflows if sentiment reverses. Heavy mutual fund ownership sometimes leads to increased volatility in corrections.
Also read | In 2025 Rs. Only 19 stocks halved the 2.7 lakh crore mutual fund inflows
Most underdown stocks
On the flip side, some leading stocks are significantly underperformed by mutual funds, even though they dominate benchmark indices or broader market narratives:
Reliance Industries, the largest stock by market capitalization, is 26% underweight in the mutual fund portfolio relative to its index weight. This suggests doubts over near-term outperformance or concerns over valuation and sector allocation.
HDFC Bank, long considered a bellwether for smart money, underperformed its index weight by 9% despite maintaining high visibility and liquidity.
ITC and Tata Consultancy Services (TCS), both consumer and technology blue chips, stand out as major underweights. ITC, in particular, is 28% underowned, a possible reflection of sector rotation or ESG constraints.
Other prominent names on the underown list include Hindustan Unilever, JSW Steel, Titan Company, Grasim Industries, Nestlé India, Adani Ports and Bajaj Finance.
Reasons for such widespread underownership among heavyweights range from earnings uncertainty, sector rotation (towards financials, auto and pharma), regulatory risks to simple valuation fatigue.
Also read | Mukesh Ambani breaks the Quick Commerce party. Can Reliance disrupt the 10-minute game of Blinkit, Swiggy, Zepto?
Trends across fund houses
Ownership bias varies not only at the stock level but also across asset managers. Leading mutual funds such as HDFC, ICICI Prudential and SBI Mutual Fund show overweight positions in certain banks and autos, while dramatically underweighting themselves against heavyweights in FMCG, tech and metals.
Energy and FMCG are particularly underweight, as mutual funds chase strategic alpha out of sectors that have underperformed or are seen as crowded out by global investors.
For investors, heavy positioning in large, popular stocks underscores the need to monitor not only fundamentals but also ownership trends and institutional trends. Overowned stocks can be susceptible to sharp corrections during periods of market uncertainty, while underowned blue chips can offer mean-reversion opportunities if sentiment changes.
In an increasingly polarized market, being aware of where the big bucks are accumulating and where they are conspicuously absent can be as important as reading the balance sheet or the latest earnings report. Further leadership in the market may very well come from today’s underowned giants as institutional preferences reposition in a volatile investment landscape.
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