The last few months have been robust for mutual fund flows into equity funds, hybrid funds and passive funds. Debt fund flows have been mixed due to the cyclical treasury effect. Indian mutual funds are averaging close to Rs11,500cr per month in SIP flows and this figure has been consistently growing. SIP flows sustained, notwithstanding the market sell-off.
What is gratifying about the flows into SIPs is not the quantum of flows, but the folio count. In the month of Feb-22, the total SIP folios crossed the 5.2cr mark for the first time. It does appear like millennials and Gen-X investors adopted SIP route to investing in mutual funds. Despite the gyrations in the Nifty and Sensex and the FPIs selling $25 billion in 5 months, SIP flows were steady and consistent. MF investing has finally come of age in India.
Here we look at the next level of the question. If equity funds and hybrid funds are getting so much inflows, what are fund managers doing with the money? Obviously, they do not sit on too much cash, so there must be a mix of fresh buying and portfolio churning. What are the stocks they are buying and selling? For a detailed and granular understanding we break the target investment into large caps, mid-caps and small caps. In the last few months fund managers used volatility in markets to churn portfolios in sync with emerging ideas and those stocks that were in sync with futuristic value creation.
Large cap stocks that mutual funds bought and sold in Feb-22
Let us begin with large cap stocks. Please note that we stick to the traditional AMFI definition of large caps here. AMFI defines large caps based on the ranking by market capitalization. Here is how it is done. The universe of stocks across NSE and BSE are ranked descending on market cap. Then, the top 100 stocks by market capitalisation are classified as large cap stocks. Now, we turn to the major large cap stocks mutual funds bought and sold in Feb-22.
In Feb-22, mutual funds overall added 181 lakh shares of Tata Motors, 69 lakh shares of IndusInd Bank, 40 lakh shares of DLF and 31 lakh shares of United Spirits. If Tata Motors is emerging attractive for its EV focus, IndusInd saw mutual fund buying interest for the second month in succession on hopes of higher management control. DLF was more a play on the fast growing housing demand. Apart from these, mutual funds also added 15 lakh shares of Godrej Consumer Products, 9 lakh shares of Gland Pharma and 2 lakh shares of Siemens Ltd.
Let us now turn to the large cap selling. Banks bore the brunt of mutual fund selling after it became clear that the US Fed planned to hike rates aggressively. Not surprisingly, about 754 lakh shares of Punjab National Bank were sold, 104 lakh shares of Cadila Healthcare and 72 lakh shares of Bandhan Bank were sold in Feb-22. Mutual funds also sold 57 lakh shares in Biocon Ltd, 26 lakh shares in Adani Enterprises, 24 lakh shares in IDBI Bank, 20 lakh shares in Indus Towers and 18 lakh shares of Hindustan Zinc Ltd. Overall, Feb-22 saw a fairly robust churn with a bias against banks and financials and in favour of defensives.
Mid-cap stocks that mutual funds bought and sold in Feb-22
Let us quickly turn to how mid-cap stocks are defined? If the top 100 stocks by market capitalization, as explained earlier, are classified as large cap stocks; then the 101st to the 250th rank are classified as mid-cap stocks. Here are the highlights of the mid cap stocks that mutual funds bought and sold in Feb-22.
In Feb-22, mutual funds overall added 706 lakh shares of SAIL, 69 lakh shares of L&T Finance Holdings, 195 lakh shares of GMR Infrastructure, 94 lakh shares of RBL Bank and 66 lakh shares of LIC Housing Finance. SAIL has been a rock solid institutional play on the metals space amidst the Russian war crisis. In the case of LIC Housing and RBL Bank, it was more of value buying at lower levels. Apart from these, mutual funds also added 24 lakh shares of IRCTC, 13 lakh shares of Polycab and 10 lakh shares of Dalmia Bharat.
Let us now turn to the major mid-cap selling in Feb-22. About 95 lakh shares of Zee Entertainment were sold, 42 lakh shares of Tata Chemicals and 35 lakh shares of Sun TV were also sold in Feb-22. In addition, mutual funds also disposed of 29 lakh shares of Nippon AMC, 12 lakhs shares of New India Assurance, 14 lakh shares in Amara Raja Batteries and 11 lakh shares of Apollo Hospitals. Overall, Feb-22 saw a major sell-off in media plays while there was a lot of cherry picking among mid-cap financials.
Small cap stocks that mutual funds bought and sold in Feb-22
Finally we come to the small caps. On the market capitalization roster, the stocks ranked 251st and lower are classified as small caps by AMFI. Here are the key small cap stocks that mutual funds were most active in Feb-22.
In Feb-22, mutual funds added 48 lakh shares of Indiabulls Housing Finance, 28 lakh shares of PVR Ltd, 17 lakh shares of Graphite India and 13 lakh shares of ESAB India. The theme, as is the case with small caps, was largely stock specific. In addition, mutual funds also added 14 lakh shares of Indiabulls Real Estate, 7 lakh shares of V-Mart, 6 lakh shares of Phillips Carbon Black, 6 lakh shares of Amrutanjan and 9 lakh shares of Mayur Uniquoters.
Let us now turn to the small-cap selling in Feb-22. About 308 lakh shares of Engineers India were sold in Feb-22, 60 lakh shares of EPL Ltd, 34 lakh shares of Allcargo Logistics and 19 lakh shares of Just Dial were sold in Feb-22. In addition, mutual funds also sold 8 lakh shares in KRBL, 6 lakh shares in Igarashi Motors, 4 lakh shares in Route Mobile and 3 lakh shares of Solara Active Pharma. The choices were largely stock specific.
To sum it up, the month of Feb-22 saw a rush for quality and few futuristic ideas. However, there were also indications of mutual funds showing a proclivity to indulge in value buying at lower levels. That is the good news!