MFs stick to 1,082 stocks in 2024, add only 67 new positions

Currently, India has 44 mutual funds investing in equities, with assets under custody totaling around Rs 43 lakh crore.

Indian mutual funds (MFs) have refrained from significantly increasing their stock picks, despite receiving substantial inflows over the past two years. In 2024, MFs added just over 6 per cent more stocks, rising to 1,082 stocks in November from 1,015 in December 2023 — an increase of around 67 stocks.

This remains only slightly higher than the 881 stocks held in December 2022. These additions have come primarily through initial public offerings (IPOs) listed in the past two years, with no notable additions from existing stocks.

"Lots of money inflow has been routed towards newly-listed companies as we have seen the highest numbers of IPOs in the last months. There can be possibility that MF managers have chosen to diversify fresh money inflow to participate in the newer businesses such as Enviro Infra, NTPC Green Energy, Waaree Energies, Premier Energies, Bajaj Housing Finance. These are very few recently listed best-performing IPOs," said analysts.

At present, MFs utilise only about 20 per cent of the over 4,200 stocks listed on the Bombay Stock Exchange (BSE). Historical data shows that MFs invested in just over 800 stocks between January 2018 and December 2021. However, between June 2016 and December 2017, the corresponding figure hovered between 700-800.

India has 44 MFs investing in equities. The total assets under their custody are around Rs 43 lakh crore. Over half of these assets are concentrated in just 27 stocks. HDFC Bank tops the list as the most owned stock by MFs, with holdings valued at Rs 2.73 lakh crore, followed by ICICI Bank at Rs 2.22 lakh crore and Reliance Industries Ltd (RIL) at Rs 1.51 lakh crore. Infosys, Bharti Airtel, and L&T round off the list of the most owned stocks by MFs.

So far in 2024, out of the 1,082 stocks, nearly 272 have delivered negative returns, while 100 stocks have provided single-digit gains. The remaining stocks have surged, delivering returns ranging between 10 and 400 per cent.

MFs have witnessed steady inflows into equity schemes over the past few years. Inflows into open-ended equity funds have remained positive for 45 consecutive months. This year, inflows have totaled Rs 3.53 lakh crore since January, significantly higher than the Rs 1.61 lakh crore recorded in both 2023 and 2022.

Prashant Tapse, Senior Vice President and Research Analyst, Mehta Equities, said, "If we look at the last 12 months we have seen newer and diversified sectors and businesses, which tested the capital markets and got space into fund managers portfolio. Fund managers are facing a tough situation when it comes to choosing age old traditional business models versus the new age tech based business models. The new-age business dynamics are winning the minds of funds and taking space into their portfolio."

Indian capital markets have shown relatively smaller corrections, as compared to their global counterparts over the past few years, despite ongoing geopolitical tensions, high inflation, and the Reserve Bank of India’s (RBI) stance to keep interest rates unchanged in the near term.