The month of the February was largely marked by the aftermath of the sell-off in Adani group stocks and led to the markets closing lower for the month. After net selling $16 billion of equities in the year 2022, FPIs have sold $4.21 billion in the first two months of 2023. The surge in FPI buying in the second half of 2022 has not really sustained in the current calendar year.
Lot of domestic money is flowing into equities
If FPIs remained on the sell side, domestic institutions like mutual funds, LIC and the domestic insurance companies remained buyers. In the last 17 months, domestic players have been consistent buyers, even as FPIs have been selling. For global investors, the Fed hawkishness, India’s vulnerability to inflation and its relatively higher valuations, have been sentiment dampeners. In the last few quarters, domestic institutions have not only been consistent buyers, but have also raised their stakes in Indian companies on a yoy basis.
If you look at February 2023, flows into equity funds were to the tune of This is at a time when FPI share of Indian companies has been gradually falling. For the month of February 2023, Indian mutual funds got SIP inflows of Rs15,686 crore, SIP inflows were to the tune of Rs13,686 crore and NFOs collected Rs7,187 crore. That is a lot of money and that raises a very pertinent question. Where was all that money being invested? The best way to answer that question from an equity perspective is to look at the portfolio changes of mutual funds.
We focus on the stocks that mutual funds and the stocks that they sold and in what quantity. Mutual funds are an imposing number as they manage close to Rs40 trillion as AUM under active and passive equity and debt combined. That is nearly $500 billion and that is a lot of money. Here is what mutual funds did in February 2023 across large caps, mid-caps, and small caps.
Large cap stock moves of mutual funds in February 2023
What do we understand by large caps? For simplicity and for comparison purposes, we stick to the AMFI definition based on market cap rankings. This is how AMFI does it. Firstly, the combined universe of listed stocks on NSE and BSE are ranked descending based on market capitalization. From this list, the top-100 stocks by market capitalization are classified as large cap stocks. This list is reviewed by AMFI on a half yearly basis to ensure definitions are up to date. Here are major large cap stocks mutual funds bought and sold in February 2023.
Let us start with the mutual fund large cap buys first! Overall, the mutual funds added 497 lakh shares of GAIL India Ltd, 252 lakh shares of Tata Motors, 111 lakh shares of Tech Mahindra Ltd, 72 lakh shares of Interglobe Aviation (Indigo Airlines), 30 lakh shares of Dabur India Ltd, 15 lakh shares of LTI Mindtree and 12 lakh shares of Havells India Ltd. Apart from the above, mutual funds added smaller quantities of Info Edge Ltd, Macrotech Developers Ltd and Hindustan Zinc Ltd during February2023. There appears to be an attempt by mutual funds to do value buying amidst the correction in select stocks and correct under-exposure.
We now turn to major large cap selling by mutual funds in February 2023. The selling was prominent in select Adani stocks, especially in the aftermath of the Hindenburg report. A total of 664 lakh shares of Bank of Baroda were sold, apart from 289 lakh shares of Adani Ports and SEZ, 275 lakh shares of Ambuja Cements and 17 lakh shares of Adani Enterprises within the Adani group. Other major stocks sold in February 2023 included 174 lakh shares of Tata Power, 116 lakh shares of Vedanta, 43 lakh shares of UPL Ltd and 11 lakh shares of Dr Reddy’s Laboratories Ltd. Mutual also funds sold smaller quantities of Adani Total Gas and Tata Elxsi during February 2023.
Mid-cap stock moves of mutual funds in February 2023
Let us now turn to the AMFI methodology to classify a stock as mid-cap? Under the AMFI definition, once the top 100 stocks by market cap are classified as large cap stocks, the 101st to 250th ranked stocks by market cap would qualify as mid-caps. Here are the mid-cap stocks that mutual funds bought and sold in February 2023.
Let us first focus on mid-cap buying in February 2023, to begin with. Overall, mutual funds added 134 lakh shares of Biocon Ltd, 103 lakh shares of Syngene International, 38 lakh shares of One97 Communications Ltd (Paytm), 23 lakh shares of Coforge Ltd, 12 lakh shares of HDFC Asset Management Company Ltd, 8 lakh shares of Gujarat Fluorochemicals Ltd and 7 lakh shares of Star Health and Allied Insurance Ltd. In addition, mutual funds added smaller quantities of 3M India, Dr Lal Pathlabs and Blue Dart Express Ltd. Mid-cap buying was focused on alpha seeking with a focus on the Biocon group stocks.
We now turn to major mid-cap selling. In February 2023, Mutual Funds sold 687 lakh shares of Vodafone Idea Ltd, 298 lakh shares of IDFC First Bank, 258 lakh shares of Indian Railway Finance Corporation (IRFC) Ltd, 152 lakh shares of Steel Authority of India Ltd (SAIL), 123 lakh shares of CG Power and Industrial Solutions Ltd, 64 lakh shares of Canara Bank, 18 lakh shares of Phoenix Mills, 16 lakh shares of Aditya Birla Capital as well as Sun TV Network and 6 lakh shares of Colgate Palmolive. Like in the previous months, the selling was quite pronounced in Vodafone Idea, IDFC First Bank and SAIL.
Small cap stock moves of mutual funds in February 2023
Finally we turn to the small cap stocks. On market cap ranking, the stocks ranked 251st and lower are classified as small caps by AMFI. Here is a quick snapshot of key small cap stocks where mutual funds were active in February 2023.
In February 2023, mutual funds added 95 lakh fresh shares of PVR Ltd, 83 lakh shares of Zensar Technologies, 76 lakh shares of Heritage Foods, 48 lakh shares of Indiabulls Housing Finance Ltd, 20 lakh shares of Syrma SGS Technologies, 9 lakh shares of Aavas Financiers and 7 lakh shares of Kaynes Technology India Ltd. In addition, mutual funds also purchased smaller quantities of small cap stocks including Safari Industries, Privi Specialty Chemical Industries and Nazara Technologies Ltd during the month of February 2023.
Let us conclude with the small-cap selling in the month of February 2023. Mutual funds sold 160 lakh shares of National Aluminium Company (NALCO) Ltd, 12 lakh shares of ICICI Securities, 10 lakh shares of Easy Trip Planners and 7 lakh shares of Anupam Rasayan Ltd. In addition, the month of February 2023 also saw mutual funds net selling smaller quantities of stocks like CarTrade, Anand Rathi Wealth, Greaves Cotton, DCX Systems, Data Patterns India Ltd and Prudent Corporate Advisory Services Ltd.
What are the major takeaways from the buying and selling data of mutual funds in the month of February 2023? In the large caps, there is a shift into old favorites and dividend yield plays as a hedge against market volatility. In the mid-cap and the small cap space, the shifts are a lot more focused in favor of alpha. However, at a time when the concerns are more at a macro level and about global headwinds, the mutual funds are finding a lot of solace in stock selection among the mid-cap and small cap stocks.
Domestic mutual funds spread their investments across large caps, mid-caps and small caps in July.
Gold/NCD/NBFC/Insurance and NPS
Gold/NCD/NBFC/Insurance and NPS