For a change, it is retail investors driving the bull run this time around
Infosys, ICICI Bank, SBI, Dr Reddy’s among top stocks where MFs raise stake in February
Having long played second fiddle to their overseas counterparts in the stock market, domestic mutual funds finally seem to have come into their own. And driving this transformation is the eagerness of retail investors to invest in equities.
Equity assets managed by local mutual funds rose for the third straight month in February to a new peak of Rs 4.6 trillion, up 4.6 percent over the previous month, according to a report by broking firm Motilal Oswal Securities. Equity AUM, as a percentage of India’s market capitalization, increased 23 bps on a year-on-year (YoY) basis to 3.9 percent in the month of February, said the report.
Renewed retail appetite for equities has helped neutralise sustained selling by foreign institutional over the last seven months. This is contrary to the general trend in the past when retail investors’ entry was a sign of market topping out.
Between August 2016 and February 2017, local mutual funds net bought a little over Rs 45,000 crore of equities, compared to net sales of around Rs 2600 crore by FIIs.Total assets under management of the mutual fund industry rose 3 percent month-on-month (MoM) in February to touch a new high of Rs 17.9 trillion, as inflows into income and liquid funds too were robust.
IT stocks which came under pressure post-December quarter results were lapped up by mutual funds. On a month-on-month basis, the weights of technology, healthcare, consumer, NBFCs, oil & gas, PSU banks and telecom stocks were increased.
However, MFs booked profits or brought down their holding in sectors such as auto, private banks, cement, chemicals, infra and utilities.
MFs have played a key role in boosting bullish sentiment in India market. They remained net buyers at times when foreign institutional investors (FIIs) were on a selling spree. Foreign investors dumped more than Rs 35,000 crore in India equity markets from October-January.
Although, the March numbers might not be as bullish for mutual funds because DIIs have turned net sellers so far in the month of March. FIIs poured in more than Rs 12,000 crore in Indian equity markets while DIIs dumped more than Rs 5,000 crore in Indian markets in the same period.
However, India is still a buy-on-dips market and investors should not discontinue or book profits in their systematic investment plans (SIPs) even though it might be showing hefty gains given the fact that benchmark indices are trading at record highs.
The market looks reasonably valued at this point of time, and strong gush liquidity could take market levels ahead of their fundamentals.
“We have always advised retail investors to invest in equity mutual funds through SIP route to overcome volatile phases in the market. Even today we advise the same, as we expect next 2-3 years to be the earnings recovery phase for the market,” Harsha Upadhyaya, CIO, Equity, Kotak Mutual Fund told Moneycontrol.com.
Top stocks on MF Radar:
Of the top 10 stocks in terms of value increase on a MoM basis, three were from banks, but Infosys from the IT space hogged the limelight.
Infosys saw a total increase of Rs 22.5 billion in value as 9 out of 20 funds bought the stock. Among Banks, ICICI Bank (Rs 26 billion), SBI (Rs 11 billion) and Axis Bank (Rs 10 billion) saw an increase in value on an MoM basis.
Dr Reddy’s was also one of the preferred stocks among MFs in February, saw net buying by 10 funds. Value increased by Rs 6.5 billion, despite the stock delivering a negative return in the month.
MFs booked profits in HDFC Bank which saw a decline of Rs 30.3 billion in value as 19 out of 20 funds sold the stock. Notably, the stock was up 7.9 percent in February.Tata Motors too value erosion of Rs 3.7 billion, essentially led by a price fall of 12.9 percent on a MoM basis. Notably, volume change was positive 8.9 percent as 8 funds saw net buying during the month.