The month of October saw a notable change in the sector and stock allocation of funds.
According to a report titled ‘Fund Folio’ from Motilal Oswal, on a month-on-month (MoM) basis, the weight of automobiles, PSU banks, oil and gas, healthcare and consumer stocks increased, while that of technology, capital goods, private banks, NBFCs, cement, metals and telecom stocks moderated.
In October, information technology’s weight hit a 17-month low of 8.2 percent on account of which the sector slipped to the fifth position in the sector allocation of mutual funds (MFs).
On the other hand, oil and gas’ weight increased for the fourth successive month to hit an all-time high of 8.7 percent. The sector is at the third position in sector allocation of MFs.
Mutual funds were net buyers in 56 percent of the Nifty 50 stocks.
“The sector rotation in Dynamic All Cap diversified Equity Funds not only gives returns competitive with diversified benchmarks like Sensex/Nifty, it is also less risky than dedicated sector funds,” quipped an ex SEBI DGM who is now a portfolio investor.
In terms of value increase MoM, six of the top 10 stocks were from the financial space-State Bank of India, Axis Bank, ICICI Bank, Bandhan Bank, ICICI Lombard and HDFC.
In October, Reliance Industries’ value increased by Rs 38.5 billion. The stock saw net buying by eight of the top 20 funds.
The highest net buying by fund managers was witnessed in Bharti Infratel, Ultratech, Bajaj Finserv, Cipla and GAIL in October.
Stocks that exhibited maximum decline in value on month-on-month were Infosys, IndusInd Bank, Century Textiles, Aurobindo Pharma, Interglobe Aviation.
Systematic investment plans (SIPs) continued to be the backbone of mutual funds as inflows via this mode remained above Rs 8,000 crore despite a mixed performance seen in the Indian indices.
"Investors continued parking money in mutual funds, with inflows and contribution of systematic investment plans (SIPs) remaining stable at Rs 82.5 billion," Motilal Oswal said in its report.
Fund managers said that apart from more retail participation, increased flows in liquid and income funds led to the rise in AUM.
“In SIP mode of investing , in sector funds investor are increasing their risk exposure to single sector, thus SIP style of safety and long term investing is best suited in dynamic multiple sector equity funds,” added the ex SEBI officer.
After reaching a landmark of Rs 25 lakh crore for the first time last year on AUM, the domestic mutual fund industry AUM surpassed another key level of Rs 26 lakh crore last month.