Pharma, tech see MF weightage rise in July

Further, energy, infrastructure, and metals continued as underweights with little change.

India’s largest asset managers reshuffled sector exposures in July, increasing stakes in pharma and technology while slightly trimming allocations in some previously overweight sectors.

According to Elara Capital’s Domestic Liquidity Tracker, the changes in pharma and tech were led by HDFC MF, ICICI Prudential MF, and SBI Mutual Fund. Most fund houses, meanwhile, continued to remain underweight in sectors like IT services exporters and NBFCs.

Pharma saw the sharpest rise, with allocations climbing to 0.4 percent of market capitalisation and 0.5 percent of AUM, up from 0.3 percent and 0.4 percent in June. Further, overweight participation widened to nine AMCs from eight.

HDFC MF more than doubled its pharma weight to 3.3 percent from 1.4 percent, ICICI Prudential MF raised it to 1.8 percent from 1.7 percent, and Axis MF and Kotak MF continued to hold nearly 2 percent. Meanwhile, median three-month stock outperformance versus Nifty stood at 5.4 percent, slightly lower than June’s 6 percent.

Stock specific flows showed 18 net buys against four sells, led by Sun Pharma and Cipla, alongside fresh allocations to Dr. Reddy’s, Lupin, and Aurobindo Pharma.

Explaining the focus on pharma, Vineet Gala - Founder & Fund Manager at Xylem PMS, said that while tariff pressures remain concentrated on innovator drugs, generic players continue to benefit from a more stable pricing environment in the US.

“Many largecaps are also aggressively diversifying beyond US. Notably, large-cap pharma companies like Natco and Aurobindo are diversifying beyond the US market to tap growth in emerging geographies, thereby enhancing stability. Additionally, deals such as Glenmark’s recent strategic move have reignited investor interest in novel drug plays, positioning the sector not just as a defensive safe harbour but also as a compelling growth opportunity,” he said.

Technology allocations also rose, reaching 0.9 percent of market cap and 0.4 percent of AUM, up from 0.7 percent and 0.3 percent in June. Seven AMCs carried overweight positions, unchanged in breadth but higher in allocation.

HDFC MF increased tech weight to 2.9 percent from 2.3 percent, ICICI MF to 2.6 percent from 2.3 percent, and SBI MF to 3.3 percent from 2.8 percent. Stock-level flows included 22 buys and six sells, with Infosys attracting the most AMC participation, followed by HCL Tech and Tech Mahindra, while Wipro and LTIMindtree saw net reductions. The sector’s median three-month outperformance narrowed to 0.2 percent from 5.8 percent in June.

NBFCs remained the most under-owned sector with HDFC MF reducing Bajaj Finance exposure to 4.9 percent from 6.1 percent, ICICI MF staying at 5.5 percent, and SBI MF hovering near 1.2 percent. The median three-month stock outperformance versus Nifty flipped from -9.3 percent in June to +4.6 percent in July. Stock-level flows included seven buys and 13 sells, largely in Bajaj Finance and Bajaj Finserv.

IT services exporters remained underweight at 0.7 percent of market cap and 1.1 percent of AUM, from 0.7 percent and 1.2 percent, respectively in June. HDFC MF reduced underweight from -0.9% to -0.2%, ICICI Prudential MF from -3.3% to -1.6%. Flows included nine buys versus 11 sells, with Infosys and HCL Tech attracting most interest.

Further, energy, infrastructure, and metals continued as underweights with little change.

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