The first month of 2020 saw the top 20 mutual fund houses tweaking their sectors and stock allocation.
MFs showed interest in telecom, cement, chemicals, capital goods, healthcare, consumer, NBFC, technology and retail, which witnessed an increase in weight.
Telecom weight increased for the third successive month up 40 basis point to hit an all-time high of 2.4 percent.
Fund managers are turning to the telecom sector, despite the Supreme Court slamming the companies, given the change in dynamics and more demand for voice and data usage in the country.
In the last couple of years, telecom sector was in the red given regulatory and competitive pressures.
However, fund managers expect recent developments such as a potential end to tariff woes and potential government support for the sector may bring about an inflection in its fortunes.
On the rationale behind being bullish on the telecom stocks, Sundaram MF's Chief Investment Officer, S Krishnakumar said: "Worst is behind us in the sector, pricing power will moderate in the recumbent industry as it is seeing demand in a voice and data space. We believe that this kind of oligopolistic industry will have a lot of wealth creation for the investors with voice and data being the long term drivers.
According to a report from Motilal Oswal Financial Services titled 'Fund Folio-Indian Mutual Fund Tracker', Bharti Airtel saw maximum increase in value worth Rs 5,630 crore.
Shares of Bharti Airtel surged 18 percent last month. Vodafone Idea shares, on the other hand, were down nearly 14 percent in January.
Bharti Airtel stands to be one of the biggest beneficiaries if rival Vodafone Idea plans to shut shop.
Voda Idea Chairman Kumar Mangalam Birla has warned that Vodafone Idea will have to be shutdown if the government doesn't provide relief that the company has sought. He had said the company will have to opt for insolvency route in the absence of relief.
The less favoured
Less favoured in January were oil & gas, metals, automobiles, and utilities saw an MoM decrease in weight. MFs were net buyers in 52 percent of the Nifty stocks in January.
Auto industry is facing a slowdown as consumers are facing problems in securing vehicle loans and the companies are shifting to BS-VI emission norms as mandated by the government.
As per the Supreme Court's decision to reduce environmental pollution, Bharat Stage (BS)-VI emission standards are going to be implemented from April 1 and new vehicles will be sold in the country as per this standard only.
With this, the registration of BS-IV category vehicles will be stopped.
Last month, the weight of oil & gas sector hit a seven-month low of 7.3 percent, a drop of 90 basis point MoM.
As a result, the sector slipped to the fifth position in sector allocation of MFs from the third spot in December 2019.
Among sectors, private banks with 20.3 percent was the top sector holding last month, followed by NBFCs (9.4 percent), Consumer (8.1 percent) and Technology (8.1 percent).
In terms of value decrease, HDFC Bank, State Bank of India, IndusInd Bank and Axis Bank witnessed the maximum decline in value on a MoM basis.
The benchmark indices hit a record high in mid-January due to the run-up ahead of Union Budget. At the end of January, Sensex had fallen more than 500 points and Nifty50 was below the psychological 12,000-mark.
The Indian equities market came off record-high levels in January 2020 on the back of caution ahead of the Union Budget and heightening concerns around Coronavirus and its potential impact on global economy. Nifty ended 1.7 percent lower at 11,962 in the month.
Mutual funds (MF), however, held their ground with inflows picking up and the contribution of systematic investment plans (SIPs).
The inflows into systematic investment plans (SIP) continued to be robust to new all-time levels at Rs 8,532 crore in January 2020, against Rs 8,518 crore during the previous month.
MF Flows
The domestic MF industry created a new record in January 2020 as a total asset under management inched up to Rs 27.9 lakh crore up 5 percent over December, primarily led by liquid funds, income funds and equity funds.
The 43-player mutual fund industry witnessed inflows of Rs 7,548 crore in equity schemes in January, up 70 percent from December.
According to the data on the Association of Mutual Funds in India (AMFI), equity schemes had reported inflows of Rs 4,432 crore in December.
All categories witnessed inflows during January, barring contra fund category (outflows Rs 735 crore) and dividend yield (Rs 63 crore outflows) in the equity schemes category.
Gross sales of equity schemes (including ELSS and arbitrage) were up 7 percent MoM at Rs 28,400 crore. At the same time, redemptions declined 11 percent MoM to Rs 19,000 crore.
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