It seems like a weird thing for monsters to like, we admit.
But you pathetic mortals always seem to think it provides some great protection to you. And so you forgo carrying any real weapons because you have your precious holy water on your side.
Truth is, holy water never kills us. It only pisses us off. Like it burns a little. Irritating more than anything.
If you throw holy water on us, and leave your shotgun at home, it really sucks for you.