Mutual funds offloading large-caps for mid-caps
Mutual funds were net sellers of equity assets worth Rs 9,195 crore in July as the stock market peaked to a five-month high from the March lows, as per data provided by the Securities and Exchange Board of India.
A portfolio analysis of top mutual funds like SBI and HDFC Mutual Fund show they sold part of their large-cap stockholdings in their portfolios in July and redeploying the money in the midcap and other promising large stocks.
Even smaller mutual funds said they reduced holdings in some stocks due to higher valuations, superlative returns obtained and on view that the business had changed.
This month too mutual funds have been net sellers of equity assets worth Rs 3,857.87 crore, as on August 14.
Debt mutual funds saw a net investment of Rs 31,897.85 crore in July and Rs 5,946.51 crore in August so far.
Since many large-cap stocks’ prices peaked due to abundant liquidity despite their weak fundamentals due to the Covid19 impact, fund managers have started to shift their allocation to potential underperforming mid-caps, leading to a rally in the broader market of late.
Atul Kumar, head-equity, Quantum Mutual Fund, said, "July turned out to be another good month for Indian equities. S&P BSE Sensex performed significantly better than developed market indices such as Dow Jones and S&P 500 in July.
“Position in a healthcare stock was trimmed during the month owing to higher valuations and the stock giving superlative returns. The scheme is also selling its position in a power utility stock as its view of business has changed.”
Mid-cap stocks are still looking attractive to fund managers and they still see many winners in the broader market compared to their large-cap holdings.
“S&P BSE Sensex performance was slightly better than emerging markets overall. It gained 9.05 per cent as compared to 9.01 per cent return by MSCI Emerging Market Index in US dollar terms. Small and mid-cap indices’ gains lagged that of the narrower benchmark S&P BSE Sensex. S&P BSE Mid-cap Index made a gain of 5.5 per cent during the month. Return on
BSE Small-cap Index was 5.3 per cent,” Kumar said.
According to reports SBI Mutual Fund has reduced holdings in SBI, Reliance Industries, Axis Bank, ICICI Bank, HDFC Life and raised holdings in mid-caps like Union Bank, Federal Bank, SJVN, Indian Hotel and NHPC.
Navneet Munot, chief investment officer, SBI Mutual Fund, in a letter to SBI Mutual Fund investors says his funds are sticking to a bottomup approach for stock picking as there are real risks because of a retail frenzy, plateauing economic activity, a potential fiscal cliff in the US and uncertainty around the US presidential elections.
HDFC Mutual Fund, the Second largest fund house in the country also sold shares of Reliance Industries, HDFC Bank, ITC, Axis Bank, Vodafone Idea and Aurobindo Pharma among others while the fund house picked up shares of Wipro, Infosys, Sun Pharma, Tata Steel and CDSL, among others.