The six most favourite sectors of mutual funds. Are you invested in them?
Banking is the sector on top of the list of mutual fund holdings. But allocation to pharmaceuticals have gone down, despite being one of is top most sectors
Though most mutual funds follow a bottom-up approach while choosing stocks, fund managers are conscious about picking the right sectors. They look for sectors having healthy growth potential and consistent profitability. Over the past two years, COVID-19 has impacted businesses across the world and reshaped the way they operate. Many sectors have become 'flavours of the season' while many turned out of favour. Here is the list of top six sectors that are preferred the most by mutual funds. Data as on August 31, 2021.
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Banking has been the most preferred sector for MFs accounting for about one-fifth of the industry’s equity AUM. The sector has grown faster than India’s GDP over the last two decades. The top five banking stocks held by mutual funds include ICICI Bank, HDFC Bank, State Bank Of India, Axis Bank and Kotak Mahindra Bank.
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As businesses get increasingly digitized and invest more in technology, software companies capitalised on the trend and did well. Stocks that are favourites are Infosys, Tata Consultancy Services, HCL Technologies, Tech Mahindra and Info Edge (India).
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With fund houses, insurance companies, non-bank firms getting listed, that opened up avenues for fund managers to capitalise on newer income streams. Some of the financial services companies that are held by most mutual funds include HDFC Ltd, Bajaj Finance, SBI Life Insurance Company, Bajaj Finserv and Max Financial Services.
FMCG, once perceived as defensive sector, has seen growth in these tough times. With continued fear of complete lockdown, food-based retail chains and essential commodity providers have emerged as winners. Top stocks in the sector include ITC, Hindustan Unilever, Asian Paints, Nestle India and Tata Consumer Products.
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Between 2015 and 2020 Indian pharma companies had a rough ride. However, rising demand for certain drugs during the Covid-19 pandemic pushed pharma stocks higher. Sun Pharmaceutical Industries, Divi's Laboratories, Cipla, Dr. Reddy's Laboratories and Ipca Laboratories are a few preferred stocks among mutual funds.
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The top five preferred stocks for mutual funds in the petroleum product sector include Reliance Industries, Bharat Petroleum Corporation, Hindustan Petroleum Corporation, Indian Oil Corporation and Castrol India.
