Mutual funds among domestic institutional investors played a bigger role by infusing money into equities when foreign institutional investors pulled out funds from India by selling in big quantities in February.
Domestic mutual funds were net equity buyers in February as they net made total equity investments of Rs 28,180 crore during the month, which was significantly higher than Rs 16,488 crore in January, says IDBI Capital in its report.
In equity oriented schemes, the net inflow in February was Rs 19,645 crore, which was also higher compared to Rs 14,552 crore seen in previous month. The SIP (systematic investment plan) contribution was also strong during the month at Rs 11,438 crore against Rs 11,517 crore in previous month.
This provided great support to equities during the month as the BSE Sensex and Nifty50 corrected only 3 percent due to Ukraine-Russia war and inflated commodity prices.
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On the contrary, as per IDBI Capital, FIIs remained net sellers for fifth consecutive month in February as they net offloaded shares worth Rs 37,689 crore, against Rs 35,975 crore worth of shares selling in January.
"In current times of geo-political risks where markets have corrected sharply, yet the domestic investors have continued to add more allocation to equity. This is clearly change of attitude of investors towards this asset class and a definitely a positive change. At this stage, net domestic positive flows is supporting the massive outflows seen by FIIs on daily basis," says Akhil Chaturvedi, Chief Business Officer at Motilal Oswal AMC.
Fresh addition by mutual funds schemes in February included total eight stocks, while they exited five scrips in the same period, says IDBI Capital.
Vedant Fashions, ethnic wear brand 'Manyavar' owner, saw the highest buying by mutual funds as their shareholding is valued at more than Rs 1,500 crore at the end of February. Its shares were bought through the IPO which was launched in February.
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Other newly added stocks by mutual funds were Forbes Enviro, Eureka Forbes, Expleo Solutions, TCPL Packaging, Lyka Labs, Shanthi Gears and Ambika Cotton.
However, mutual funds schemes completely exited five stocks which are Forbes & Company, India Nippon Electricals, POWERGRID Infrastructure, Himadri Speciality Chemical, and Brillio Technologies.
In the largecap space, the sizeable chunk was deployed by mutual funds in Infosys (Rs 3,022 crore), Reliance Industries (2,377 crore), ICICI Bank (Rs 2,006 crore), State Bank of India (Rs 1,235 crore), HDFC Bank (Rs 1,151 crore), Bharti Airtel (Rs 1,026 crore), and Cipla (Rs 1,002 crore), says Abhilash Pagaria, Head of Edelweiss Alternative & Quantitative Research.
However, he says mutual fund houses trimmed stake in TCS (Rs 923 crore), Vedanta (Rs 6.08 crore), Apollo Hospitals Enterprises (Rs 494 crore), Escorts (Rs 493 crore) and Tata Power Company (Rs 410 crore).
In the midcap space, apart from Manyavar, he says Zee Entertainment Enterprises, Lupin, Ashok Leyland, Max Financial Services, and Cummins India saw maximum buying by mutual funds, whereas there was maximum selling in Escorts, Punjab National Bank, Voltas, Indraprastha Gas and KPIT Technologies.
The stock with a market capitalisation range of Rs 10,000-40,000 crore is categorised as a midcap, while the stock having a market cap below Rs 10,000 crore is generally called as a smallcap.
In the smallcap space, Pagaria says Equitas Small Finance Bank, Metropolis Healthcare, IDFC, and Barbeque Nation Hospitality saw the highest buying by asset management companies. However, the maximum selling by houses was seen in City Union Bank, Indiabulls Housing Finance, Sterlite Technologies, VIP Industries and Elgi Equipments.
The correction was more in broader space compared to benchmarks. The BSE Midcap index was down 5 percent and Smallcap index corrected nearly 9 percent in February.
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