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Here are the large-cap stocks most shunned by active fund managers

Active equity fund managers have avoided taking position on these AMFI-defined largecap stocks

October 06, 2022 / 08:52 AM IST
Fund managers apply various strategies and processes while picking stocks. Companies that lack a strong financial record, good management quality, scalability of business and an attractive valuation rarely find a place in the portfolio of mutual fund schemes. A Moneycontrol study shows that many stocks that are classified as largecap by industry body Association of Mutual Funds in India are not part of the portfolio of many actively managed schemes. AMFI has classified the top 100 companies in terms of full market capitalisation as largecaps. Ravi Kumar TV, founder of Gaining Ground Investment Services, says, “Institutional investors including mutual funds look for certain filters before new additions to their existing portfolios. Business sustainability, debt-free and business, execution capabilities matter while picking the company. The valuations of some businesses have gone up too fast in a short period of time. As and when these valuations cool down and leverage comes down significantly, they may become attractive on the watchlist of the fund managers.”
Fund managers apply various strategies and processes while picking stocks. Companies that lack a strong financial record, good management quality, scalability of business and an attractive valuation rarely find a place in the portfolio of mutual fund schemes. A Moneycontrol study shows that many stocks that are classified as largecap by industry body Association of Mutual Funds in India are not part of the portfolio of many actively managed schemes. AMFI has classified the top 100 companies in terms of full market capitalisation as largecaps. Ravi Kumar TV, founder of Gaining Ground Investment Services, says, “Institutional investors including mutual funds look for certain filters before new additions to their existing portfolios. Business sustainability, debt-free and business, execution capabilities matter while picking the company. The valuations of some businesses have gone up too fast in a short period of time. As and when these valuations cool down and leverage comes down significantly, they may become attractive on the watchlist of the fund managers.”
On the other hand, the most preferred largecap stocks are ICICI Bank, HDFC Bank and State Bank of India (SBI) that were held by 392, 359 and 340 actively managed schemes, respectively (from a total of 506 active schemes) as of August 2022. Of the least favoured stocks, the top five are from the Adani group. Deepak Jasani, head of retail research, HDFC Securities, explains, “High valuations, long-gestation projects, capital allocation issues, high debt levels, and need for more disclosures / transparency could be holding back funds from raising their stakes in Adani group companies.” However, other largecap companies from the group such as Adani Enterprise and Adani Ports and Special Economic Zone have been part of many schemes’ portfolios. The following are the top largecap stocks (as defined by AMFI) that are either totally ignored or least favoured by active mutual fund managers. Only actively managed equity funds and hybrid funds (506 schemes) were considered for the study. Arbitrage funds and passive funds (index funds and exchange-traded funds) were excluded. Data as of August 31, 2022. Source: ACEMF.
On the other hand, the most preferred largecap stocks are ICICI Bank, HDFC Bank and State Bank of India (SBI) that were held by 392, 359 and 340 actively managed schemes, respectively (from a total of 506 active schemes) as of August 2022. Of the least favoured stocks, the top five are from the Adani group. Deepak Jasani, head of retail research, HDFC Securities, explains, “High valuations, long-gestation projects, capital allocation issues, high debt levels, and need for more disclosures / transparency could be holding back funds from raising their stakes in Adani group companies.” However, other largecap companies from the group such as Adani Enterprise and Adani Ports and Special Economic Zone have been part of many schemes’ portfolios. The following are the top largecap stocks (as defined by AMFI) that are either totally ignored or least favoured by active mutual fund managers. Only actively managed equity funds and hybrid funds (506 schemes) were considered for the study. Arbitrage funds and passive funds (index funds and exchange-traded funds) were excluded. Data as of August 31, 2022. Source: ACEMF.
Adani Green Energy Total number of active schemes that held the stock as of August 31, 2022: Nil MFs’ investment value: Nil BSE Full M-CAP as on Sep 27, 2022: Rs 3,24,830 crore Change in M-CAP over past year: 82% Stockbroker Ventura Securities gave a ‘buy’ call on the stock in September 2022
Adani Green Energy
Total number of active schemes that held the stock as of August 31, 2022: Nil
MFs’ investment value: Nil
BSE Full M-CAP as on Sep 27, 2022: Rs 3,24,830 crore
Change in M-CAP over past year: 82%
Stockbroker Ventura Securities gave a ‘buy’ call on the stock in September 2022
Adani Transmission Total number of active schemes that held the stock: Nil MFs’ investment value: Nil BSE Full M-CAP as on Sep 27, 2022: Rs 4,01,873 crore Change in M-CAP over past year: 136% Broking firm Ventura Securities gave a ‘hold’ call on the stock in September 2022
Adani Transmission
Total number of active schemes that held the stock: Nil
MFs’ investment value: Nil
BSE Full M-CAP as on Sep 27, 2022: Rs 4,01,873 crore
Change in M-CAP over past year: 136%
Broking firm Ventura Securities gave a ‘hold’ call on the stock in September 2022
Adani Power Total number of active schemes that held the stock: Nil MFs’ investment value: Nil BSE Full M-CAP as on Sep 27, 2022: Rs 1,41,820 crore Change in M-CAP over past year: 283%
Adani Power
Total number of active schemes that held the stock: Nil
MFs’ investment value: Nil
BSE Full M-CAP as on Sep 27, 2022: Rs 1,41,820 crore
Change in M-CAP over past year: 283%
Adani Wilmar Total number of active schemes that held the stock: Nil MF’s investment value: Nil BSE Full M-CAP as on Sep 27, 2022: Rs 95,345 crore Change in M-CAP over past year: NA. It was listed on February 8, 2022. Brokerage Ventura Securities gave a ‘buy’ call while KRChoksey gave an ‘accumulate’ call over the last two months
Adani Wilmar
Total number of active schemes that held the stock: Nil
MF’s investment value: Nil
BSE Full M-CAP as on Sep 27, 2022: Rs 95,345 crore
Change in M-CAP over past year: NA. It was listed on February 8, 2022.
Brokerage Ventura Securities gave a ‘buy’ call while KRChoksey gave an ‘accumulate’ call over the last two months
Adani Total Gas Total number of active schemes that held the stock: 1 MFs’ investment value: Rs 4 crore BSE Full M-CAP as on Sep 27, 2022: Rs 3,79,528 crore Change in M-CAP over past year: 146% Only IIFL Quant Fund held the stock in its portfolio. Ventura Securities gave a ‘hold’ call in September 2022
Adani Total Gas
Total number of active schemes that held the stock: 1
MFs’ investment value: Rs 4 crore
BSE Full M-CAP as on Sep 27, 2022: Rs 3,79,528 crore
Change in M-CAP over past year: 146%
Only IIFL Quant Fund held the stock in its portfolio. Ventura Securities gave a ‘hold’ call in September 2022
JSW Energy Total number of active schemes that held the stock: 1 MF’s investment value: Rs 43 crore BSE Full M-CAP as on Sep 27, 2022: Rs 48,031 crore Change in M-CAP over past year: -20% Only Aditya Birla SL Pure Value Fund held the stock in its portfolio. Broking firms ICICI Securities and HDFC securities gave a ‘sell’ call on the stock (based on the reports issued over the last two months)
JSW Energy
Total number of active schemes that held the stock: 1
MF’s investment value: Rs 43 crore
BSE Full M-CAP as on Sep 27, 2022: Rs 48,031 crore
Change in M-CAP over past year: -20%
Only Aditya Birla SL Pure Value Fund held the stock in its portfolio. Broking firms ICICI Securities and HDFC securities gave a ‘sell’ call on the stock (based on the reports issued over the last two months)
Indian Railway Catering and Tourism Corporation Total number of active schemes that held the stock: 2 MFs’ investment value: Rs 12 crore BSE Full M-CAP as on Sep 27, 2022: Rs 54,408 crore Change in M-CAP over past year: -12% HDFC Large and Mid Cap and IDBI Flexi Cap Fund held stocks of the company. While IDBI Capital gave a ‘buy’ call, Prabhudas Lilladhar gave a ‘hold’ call on the stock over the last two months
Indian Railway Catering and Tourism Corporation
Total number of active schemes that held the stock: 2
MFs’ investment value: Rs 12 crore
BSE Full M-CAP as on Sep 27, 2022: Rs 54,408 crore
Change in M-CAP over past year: -12%
HDFC Large and Mid Cap and IDBI Flexi Cap Fund held stocks of the company. While IDBI Capital gave a ‘buy’ call, Prabhudas Lilladhar gave a ‘hold’ call on the stock over the last two months
Macrotech Developers Total number of active schemes that held the stock: 6 MFs’ investment value: Rs 171 crore BSE Full M-CAP as on Sep 27, 2022: Rs 46,330 crore Change in M-CAP over past year: -2% Schemes such as Nippon India Tax Saver (ELSS), Tata Business Cycle and HDFC Housing Opp Fund held the stock as of August 2022. Motilal Oswal gave a ‘buy’ call in July 2022
Macrotech Developers
Total number of active schemes that held the stock: 6
MFs’ investment value: Rs 171 crore
BSE Full M-CAP as on Sep 27, 2022: Rs 46,330 crore
Change in M-CAP over past year: -2%
Schemes such as Nippon India Tax Saver (ELSS), Tata Business Cycle and HDFC Housing Opp Fund held the stock as of August 2022. Motilal Oswal gave a ‘buy’ call in July 2022
Berger Paints India Total number of active schemes that held the stock: 8 MFs’ investment value: Rs 504 crore BSE Full M-CAP as on Sep 27, 2022: Rs 61,021 crore Change in M-CAP over past year: -23% L&T Midcap, SBI Consumption Opportunities and SBI Multi Asset Allocation Fund were the few funds that had exposure to the stock. HDFC Securities and Chola Wealth Direct gave an ‘accumulate’ call on the stock in August 2022
Berger Paints India
Total number of active schemes that held the stock: 8
MFs’ investment value: Rs 504 crore
BSE Full M-CAP as on Sep 27, 2022: Rs 61,021 crore
Change in M-CAP over past year: -23%
L&T Midcap, SBI Consumption Opportunities and SBI Multi Asset Allocation Fund were the few funds that had exposure to the stock. HDFC Securities and Chola Wealth Direct gave an ‘accumulate’ call on the stock in August 2022
Indus Towers  Total number of active schemes that held the stock: 9  MFs’ investment value: Rs 107 crore  BSE Full M-CAP as on Sep 27, 2022: Rs 49,453 crore  Change in M-CAP over past year: -43%  ICICI Direct gave a ‘sell’ call on the stock in August 2022. Schemes such as Sundaram Dividend Yield, Tata Infrastructure and UTI Core Equity Fund held notable allocation to the stock as of August 2022  Disclosure: Moneycontrol is a part of the Network18 group. Network18 is controlled by Independent Media Trust, of which Reliance Industries is the sole beneficiary.  Disclaimer: Moneycontrol.com advises users to check with certified experts before making any investment decisions.
Indus Towers
Total number of active schemes that held the stock: 9
MFs’ investment value: Rs 107 crore
BSE Full M-CAP as on Sep 27, 2022: Rs 49,453 crore
Change in M-CAP over past year: -43%
ICICI Direct gave a ‘sell’ call on the stock in August 2022. Schemes such as Sundaram Dividend Yield, Tata Infrastructure and UTI Core Equity Fund held notable allocation to the stock as of August 2022
Disclosure: Moneycontrol is a part of the Network18 group. Network18 is controlled by Independent Media Trust, of which Reliance Industries is the sole beneficiary.
Disclaimer: Moneycontrol.com advises users to check with certified experts before making any investment decisions.
Dhuraivel Gunasekaran