Mutual funds (MFs) net-bought stocks worth Rs 2,900 crore through their core equity schemes during May, with the healthcare sector grabbing the biggest pie, according to Emkay Alternative and Quantitative Research's Monthly Institutional Flow Tracker.
Healthcare got the most inflows at Rs 1,900 crore, with a significant portion directed towards three stocks, the report revealed.
The top performers
Mankind Pharma, the recently listed large-cap drugmaker, witnessed inflows worth Rs 1,530 crore by MFs in May, gaining substantial attention within just a month of its listing. Analysts love the stock for its prosperous growth prospects, strong domestic presence, extensive network, booming chronic segment and outperformance against the industry.
In the mid-cap segment, Alkem Laboratories and Procter & Gamble Hygiene and Health stood out, attracting a total of Rs 5,900 crore from MFs in May.
While expectations of benefiting from the anticipated double-digit growth in the Indian Pharma market worked wonders for Alkem, P&G Hygiene and Health capitalised on its impressive quarterly earnings.
"Going ahead, Alkem’s domestic sales continue to witness better trends, led by improving demand and increasing market share due to new launches," brokerage BP Wealth stated in its report.
Strong momentum
MFs also used the strong momentum in healthcare stocks to book substantial profits from certain counters. Max Healthcare, Narayana Hrudayalaya and Ajanta Pharma from the small and mid-cap space saw selling, following their strong run during May.
According to the report, the three stocks saw cumulative outflows worth Rs 2,230 crore, the majority of selling coming out of Max Healthcare (Rs 2,100 crore). Max Healthcare's shares surged nearly 17 percent in the last month, driven by the company's promising growth prospects.
Growth triggers
Brokerage Motilal Oswal Financial Services believes that the demand for the hospital and diagnostic industry in India remains favourable due to increasing income, healthcare needs, and higher health insurance penetration. It asserts that Max Healthcare is strategically positioned in metro cities and possesses strong execution capabilities, making it well-positioned to capitalise on these opportunities.
Also Read: Why have MFs fallen in love with Mankind Pharma just a month since its listing?
A similar story panned out for Narayana Hrudayalaya as the scrip surged over 29 percent in the last one month. The company's robust earnings for the March quarter coupled with forecasts of a strong growth trajectory ahead aided the sharp move in the counter.
"Narayana is exploring opportunities in other therapies as well such as oncology and gastro, which would improve the speciality mix," brokerage firm SMIFS wrote in its report. SMIFS also expects patients and case mixes to improve, which will result in increased EBITDA (Earnings before interest, taxes, depreciation, and amortisation).
Ajanta Pharma also saw a similar trend, climbing nearly 17 percent in the last month. Despite reporting weak quarterly numbers, the stock maintained its positive momentum due to the anticipation of robust future growth.
Analysts favour Ajanta Pharma for its strong focus on the domestic market. Motilal Oswal predicts that the company's superior execution in the branded generics segment across Domestic Formulation (DF), Asia and Africa will lead to industry outperformance. It also expects a margin expansion of at least 200 basis points over FY23-25, supported by cost relief.
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