Large cap, mid-cap and small caps that MFs traded in June 2022

13 Jul 2022 , 11:41 AM

While large caps provide beta and stability to the portfolio, it is the mid-caps and the small caps that are the source of alpha; or excess returns above the market. Mutual funds come in a whole range including diversified funds, multi-cap funds, mid cap funds, small cap funds etc and the buying and selling logic differs for each of them.

June 2022 was a month of robust flows into equity funds, although debt fund flows were in the negative due to quarter-end treasury considerations. SIPs are now stabilizing at above Rs12,000 crore per month, despite the challenging market conditions. Amidst heavy FPI selling, domestic mutual funds provided the much-needed support to the stock markets.

That has been possible due to the persistent flows into equity funds. It is now time to look beyond macro flows at what mutual funds actually bought and sold across large caps, mid-caps and small caps. The focus is on specific stocks that mutual funds bought and sold across various capitalization categories in June 2022. Such portfolio shift information gives insights into mid-cap and small cap preferences of domestic mutual funds.

Large cap stocks mutual funds bought and sold in June 2022

What do we mean by large caps. For our reference, large caps adhere to the traditional AMFI definition based on market cap rankings. Here is how. The universe of listed stocks on NSE and BSE are ranked descending on market cap. The top-100 stocks by market cap are defined as large cap stocks and reviewed every 6 months. Here are the major large cap stocks mutual funds bought and sold in June 2022.

Let us focus on the large cap buying. Overall, the mutual funds added 177 lakh shares of Vedanta, 118 lakh shares of Tech Mahindra, 103 lakh shares of ICICI Lombard General Insurance, 45 lakh shares of Grasim Industries, 42 lakh shares of Havells, 41 lakh shares of Godrej Consumer Products, 33 lakh shares of Marico and 22 lakh shares of Interglobe Aviation (Indigo Airways). Mutual funds also added smaller quantities of Piramal Enterprises and IRCTC. Some sectors like metals and IT had corrected sharply and mutual funds did bottom fishing. However, the predominance of FMCG plays in the top buys indicates that mutual funds are also playing the defensive game.

We now turn to key large cap selling by mutual funds. Mutual funds normally use corrections to churn their portfolios in favour of non-cyclicals. A total of 184 lakh shares of Ambuja Cements were sold, in the light of the recent acquisition. In addition, 154 lakh shares of Zomato, 105 lakh shares of Tata Steel, 45 lakh shares of DLF Ltd, 39 lakh shares of LIC and 22 lakh shares of Hindustan Aeronautics were sold in June 2022. Mutual funds also sold smaller quantities of Macrotech, L&T Infotech, Nykaa and Mphasis during June 2022. The selling was focussed on taking profits off the table in stocks that had shown traction but had gotten into cyclical pressures.

Mid-cap stocks mutual funds bought and sold in June 2022

What exactly is the methodology to determine if a stock is mid-cap? Here again, we stick to the AMFI definition. If top 100 stocks by market cap, as explained earlier, are classified as large cap stocks; then the 101st to 250th rank are classified as mid-cap stocks. Here is a quick look at which mid cap stocks mutual funds bought and sold in June 2022.

Let us focus on the mid-cap buying first. In June 2022, mutual funds overall added 623 lakh shares of Motherson Sumi Wiring, 569 lakh shares of IDFC First Bank, 113 lakh shares of India Energy Exchange (IEX), 41 lakh shares each of Tata Communications & Petronet LNG and 38 lakh shares of Bata India. In addition, MFs also added smaller quantities of HDFC AMC, Laurus Labs, Page Industries and Prestige Estates. Many of these mid-caps had corrected sharply in the market fall and MFs used the fall to rectify sectoral imbalances.

We now turn to the major mid-cap selling. About 654 lakh shares of Vodafone Idea were sold in June 2022. In addition, MFs sold 250 lakh shares of GMR Infrastructure, 128 lakh shares of L&T Finance Holdings, 89 lakh shares of BHEL, 72 lakh shares of Sun TV Networks and 29 lakh shares of Oil India in June 2022. There was also selling in ICICI Securities, Deepak Nitrite, Policybazaar and LTTS in smaller quantities. The theme continued to be to stay light on mid-caps where news flows were not encouraging. MFs exited mid-cap plays more vulnerable to volatility in exchange rates and oil prices.

Small cap stocks mutual funds bought and sold in June 2022

Finally we turn to the small cap category. On the market cap ranking, the stocks ranked 251st and lower are classified as small caps by AMFI and we maintained that definition. Here we look at key small cap stocks where mutual funds were active in June 2022.

In June, mutual funds added 58 lakh shares of recently listed Aether Industries, 17 lakh shares of JTEKT India, 14 lakh shares of Mirza International, 11 lakh shares each of Rain Industries & Tata Coffee, 10 lakh shares of Anupam Rasayan and 6 lakh shares of Sapphire Foods. Mutual funds added smaller quantities of Ethos Ltd, Nazara Technologies and Safari Industries during June 2022.

Finally, let us look at small-cap selling in June 2022. About 188 lakh shares of RBL Bank were sold in June 2022 for obvious reasons. In addition, MFs sold 74 lakh shares of Indiabulls Housing Finance, 29 lakh shares of Strides Pharma, 25 lakh shares of Greaves Cotton, 24 lakh shares of Chennai Petroleum and 15 lakh shares of India Cements. In addition, mutual funds sold smaller quantities of Mastek, Alkyl Amines, GNFC and IIFL Wealth.

How do we summarize the mutual fund churn story for June 2022? There was a rush to churn portfolios with bias towards profit making mid-caps and small caps. There was also urgency to get out of stagnating stocks or where vulnerability to macro headwinds was elevated. Generally, it was seen that mutual funds have been looking for opportunities in mid-caps and small caps but digging for value in large caps. Clearly, the focus of the mutual funds has been on the macro headwinds, which don’t seem to be going away in a hurry.