You are using an older browser version. Please use a supported version for the best MSN experience.

Mutual funds see top value gains in financials from January to July

LiveMint logoLiveMint 01-09-2017 Ami Shah

Mumbai: Mutual funds that have helped propel Indian stock indices to record highs have increased their allocation to financial services by the most in the seven months through July from a year ago.

Mutual funds’ allocation to the financial services sector rose to 30.43% at the end of July from 27.33% a year ago, according to data from research firm Morningstar. 

Financials added the most value to mutual funds' holdings from start of the year to July, with private ICICI Bank Ltd  leading the pack, as mutual funds added 40% more to their existing holdings.

This, coupled with price appreciation, added Rs12,264 crore to the value of the stock. 

HDFC Bank Ltd followed next with addition of Rs11,155 crore, due to a strong price rise of more than 48%, even as mutual funds net-sold the lender's shares. They sold around 7% of their earlier holdings in the period. 

Mutual funds collectively pumped in a net of Rs52,307.1 crore in Indian shares in the same period, while foreign institutional investors, or FIIs, invested a net of Rs54.906.90 crore in the asset class. 

Domestic mutual funds are becoming an attractive option for retail investors as savings avenues like bank fixed deposits lose their allure because of falling interest rates.

Since the start of the year to 23 August, mutual funds’ investments in Indian shares added up to Rs65,025.55 crore. FIIs’ net investment dropped to Rs43,453.85 crore. 

Among the top 25 stocks by value addition to mutual fund holdings, financials made up Rs. 59,803 crore; oil and gas followed next, adding Rs12,136 crore.

“There has been a sector rotation towards financials, from IT (information technology) and pharma. Financial services were looking attractive post-demonetization. The consumer finance business had cracked post-demonetization, but started looking up,” said Ritesh Jain, chief investment officer at BNP Paribas Asset Management India Pvt. Ltd 

“Money also went into metals where recovery is on the cards. IT and pharma were losing favour, and selling in that space was accelerated,” said Jain 

“This trend in favour of cyclicals may continue for now,” he added. 

Within financials, the preferred stocks have been private sector banks, housing finance companies and some public sector banks, said Kaustubh Belapurkar, director of fund research at Morningstar Investment Adviser India Pvt. Ltd. 

According to Belpurkar, this was primarily driven by expectation of re emergence of domestic growth, and as bad loan problems were seen abating. In the case of housing finance companies, the government’s low cost housing push has been seen a positive. 

“Managers have also added positions in metals stocks as base metal prices started to rebound. Managers cut positions in technology and pharma stocks, on weaker growth expectations due to a challenging business environment and a stronger rupee,” 

Among the recent listings, only Avenue Supermarts Ltd, the parent of super market chain D-Mart, made it to the list, with mutual funds holding Rs2,093 worth of shares in the company at the end of July. 

Of these top 25 stocks which added the most value in absolute terms to mutual funds’ holdings, they cut exposure to three of them to book profits, but a strong rally ensured these stocks still added substantial value. 

These three stocks were HDFC Bank, Maruti Suzuki India Ltd and Reliance Industries Ltd (RIL). These stocks rallied 48.09%, 44.80% and 49.42% since the end of December to end of July. 

Of the bottom 25 stocks, the ones which registered the largest drop in market value, pharma and IT companies shed Rs2,630 crore and Rs2,569 crore respectively. 

Shares of Tech Mahindra Ltd lost the most – Rs949 crore—as they declined 21.17% in the same period. Mutual funds trimmed their holdings in this stock by 3%. 

Sun Pharmaceutical Industries Ltd, the country’s largest drugmaker, saw its share price drop by 24.4%; mutual funds cut their holdings in the company by 8.93%.

More From LiveMint

image beaconimage beaconimage beacon