Mutual funds with the highest exposure in IDFC First Bank stock - Should investors worry?

IDFC First Bank Fraud: The recent fraud at IDFC First Bank's Chandigarh branch has caused considerable concern in the market. Following this news, the bank's stock price fell nearly 20 per cent on Monday. Therefore, it is important for mutual fund investors to know which funds hold IDFC First Bank shares. According to Motilal Oswal Research, mutual funds have invested a total of 6,990 crore, which is a 5.1 per cent increase from January MoM. They hold 83.57 crore shares, which is a 7.7 per cent increase from January MoM, as per the Motilal Oswal Research.

Here's the breakdown of IDFC First Bank shares held by various mutual funds:

These mutual funds are significant investors in IDFC First Bank.

On February 18, 2026, irregularities were discovered in some accounts belonging to the Haryana state government at the bank's Chandigarh branch. The actual account balances did not match the amounts claimed by account holders. The fraud is estimated to be approximately Rs 590 crore, more than the bank's entire quarterly profit. The bank has suspended four suspected officials, filed a police complaint, and appointed KPMG to conduct a forensic audit. The Haryana government has removed IDFC First Bank from its list of approved banks and ordered state departments to close their accounts with the bank.

Haryana Governemnt's action

The Haryana Government de-empanelled IDFC First Bank for all government business with immediate effect. As per the Finance Department’s directive, no government funds shall be parked, deposited, invested, or transacted through these banks.

All departments, boards, corporations, and public sector units have been directed to transfer the balances and close the accounts maintained with these banks without any delay, and to ensure strict compliance with the department’s banking and reconciliation guidelines by 31st March, 2026.

The government observed that certain banks are not adhering to the conditions under which fixed deposits are being made by the Departments and Corporations.

What investors need to know

While the IDFC First Bank fraud has raised concerns, mutual fund investors don't need to track every development like direct stock investors. Monitoring stock-specific risk is the fund manager's responsibility. However, investors should monitor some broad indicators to ensure their fund remains on track.

Mutual fund iInvestors should monitor the following:

The fund's overall performance in the coming months, compared to its benchmark and peer funds. If the impact of IDFC First Bank is limited, performance should not be significantly affected. Monthly portfolio disclosures to see whether the fund manager is reducing, maintaining, or increasing its exposure to the bank. Any commentary from the fund house explaining its stance on IDFC First Bank and how it is managing risk. The level of concentration in the portfolio, especially in focused or financial sector funds, where exposure to a single stock may be high.

IDFC First Bank share price

IDFC First Bank has sharply underperformed the Nifty Bank index across most timeframes, reflecting significant recent weakness in the stock. The bank’s shares fell 15.98 per cent over the past week, compared with a 0.23 per cent gain on the Nifty Bank, and declined 15.62 per cent in the past month, while the index rose 4.86 per cent.

Year‑to‑date, the stock is down 18.20 per cent, against the Nifty Bank’s 2.69 per cent rise. Even over longer periods, the underperformance persists. IDFC First Bank has returned 16.91 per cent over one year, 28.97 per cent over three years, and 9.76 per cent over five years, significantly lagging the Nifty Bank’s returns of 26.03 per cent, 53.64 per cent, and 68.21 per cent, respectively.

IDFC First Bank Ltd has found a discrepancy of Rs 590 crore in the deposits made for the Haryana Government at its Chandigarh branch. The bank has found four employees to be suspects and has suspended them.

(Disclaimer: The above article is meant for informational purposes only, and should not be considered as any investment advice. ET NOW DIGITAL suggests its readers/audience to consult their financial advisors before making any money-related decisions.)