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

12 Nov 2022 , 11:37 PM

In fact, the month of October ended with neutral flows. FPIs infused $905 million in the first half of the month of October 2022, but withdrew $904 million in the second half of the month, ending on absolute neutral basis. This was disappointing because, India had seen $6.44 billion of inflows in August. However, in September in October, the second half of the month undid all the good that happened in the first half of the month.

Indian equity mutual funds saw steady inflows of Rs9,390 crore, albeit lower than the previous months. In addition, the NFO flows for the month of October 2022 stood at Rs5,439 crore and this was largely driven by sectoral / thematic funds followed by index funds. However, the feather in the cap was the flows into systematic investment plans (SIP). At Rs13,041 crore, the October 2022 SIP flows are not only the highest recorded, but also crossed Rs13,000 crore mark for the first time ever.

Getting flows is one side of the story, but the bigger question what did the mutual funds do with all this money. Were they aggressive buyers in the equity markets or did they prefer to hold in cash and wait for the right opportunity. Here we look at the major large cap, mid-cap and small cap stocks that the mutual funds bought and sold in the month of October 2022. This is a macro picture of the mutual fund industry as a whole and it is not focussed on any specific AMC. The entire idea here is to gain insights into the stock preferences of domestic mutual funds as a whole and see if any underlying long or short themes are emerging?

Large caps that mutual funds bought and sold in October 2022

For the purpose of defining large cap stocks, we stick to the AMFI definition based on market cap rankings. As per the AMFI methodology, the universe of listed stocks on NSE and BSE are ranked descending based on their market cap. Out of this list, the top-100 stocks by market capitalization are classified as large cap stocks. Of course, this list is monitored and reviewed by AMFI every 6 months to ensure definitions are current. Here are the major large cap stocks that mutual funds bought and sold in October 2022.

We begin with the large cap buying in October 2022. Overall, the mutual funds added 588 lakh shares of Samvardhana Motherson International (SMIL), 114 lakh shares of IndusInd Bank, 110 lakh shares of Dabur India, 15 lakh shares of Hindustan Zinc, 11 lakh shares of Mindtree Ltd, 9 lakh shares of Piramal Enterprises and 8 lakh shares of IRCTC. Mutual funds also added smaller quantities of Adani Total Gas, Adani Transmission and Adani Green Energy in October 2022. Some stock buys have been common over the last few months.
We now turn to major large cap selling by mutual funds in the month of October 2022. The selling was quite prominent in the PSU stocks, probably on the back of a sharp rally in these stocks in the recent past. A total of 355 lakh shares of Coal India were sold, apart from 288 lakh shares of Indian Oil Corporation and 63 lakh shares of HCL Technologies. During the month of October 2022, other major stocks sold included 53 lakh shares of Bandhan Bank, 41 lakh shares of Cholamandalam Finance, 21 lakh shares of Tata Consumer Products, 10 lakh shares of Torrent Pharma, 9 lakh shares of Grasim Industries and 7 lakh shares of Adani Enterprises. In addition, mutual funds sold smaller quantities of Dr Reddy’s Laboratories too.

Mid-caps that mutual funds bought and sold in October 2022

Let us turn to the methodology deployed to determine if a stock is mid-cap? Here also, we stick to the AMFI definition. Once the top 100 stocks by market cap are classified as large cap stocks (as explained previously), the 101st to 250th ranked stocks by market cap are classified as mid-cap stocks. Here is a quick glance at the mid-cap stocks that mutual funds bought and sold in the month of October 2022.

Let us focus on the mid-cap buying first. In October 2022, mutual funds overall added 1,709 lakh shares of Vodafone Idea, 408 lakh shares of BHEL, 349 lakh shares Yes Bank, 147 lakh shares of Union Bank and 89 lakh shares of recently listed Delhivery Ltd. Mutual Funds also added 72 lakh shares of Petronet LNG, 58 lakh shares of Biocon, 50 lakh shares of Tata Chemicals, 37 lakh shares of L&T Finance Holdings and 36 lakh shares of Prestige Estates and Projects Ltd. The mid-cap buying was predominantly focused on alpha targets, buying stocks with the high favourable price traction.

We now turn to the major mid-cap selling. In October 2022. Mutual Funds sold 326 lakh shares of NMDC, 159 lakh shares of REC Ltd, 142 lakh shares of NALCO and 64 lakh shares of SAIL among the heavy sell candidates. Mutual funds also sold 38 lakh shares of Indraprastha Gas, 32 lakh shares of Voltas Ltd, 28 lakh shares of Bank of India and 14 lakh shares of Sun TV Network. In addition, the mutual funds were marginal sellers in HDFC Asset Management Company as well as Dixon Technologies.

Small caps that mutual funds bought and sold in October 2022

Finally we turn to the small cap stocks category. On market cap ranking, the stocks ranked 251st and lower are classified as small caps as per AMFI definition. We continue to use that definition for our rankings also. Here we take a quick look at some of the key small cap stocks where mutual funds were active in October 2022. Typically, small caps and mid-caps tend to outperform the large caps when the undertone of the market is bullish.

In October 2022, mutual funds added 178 lakh fresh shares of RBL Bank, 62 lakh shares of Rategain Travel Technologies, 59 lakh shares of Castrol India and 54 lakh shares of Indiabulls Housing Finance Ltd. In addition, small cap stocks purchased included 24 lakh shares of Religare Enterprises, 21 lakh shares of Anupam Rasayan and 8 lakh shares of Intellect Design Arena (formerly Polaris). Mutual funds also added smaller quantities of IIFL Finance and Easy Trip Planners in October 2022.

Finally, let us look at small-cap selling in October 2022. Mutual funds sold 62 lakh shares of Indiabulls Real Estate, 55 lakh shares of HUDCO, 28 lakh shares of Welspun Corporation and 26 lakh shares of ITD Cementation Ltd. In addition, mutual funds also sold 20 lakh shares of Rites, 10 lakh shares of JK Paper and another 10 lakh shares of Rain Industries Ltd. Mutual funds also sold smaller quantities of select small cap stocks including Mazagon Dock Shipbuilders and Schneider Electric Infrastructure Ltd.

What is the gist of the story that emerges from October 2022 mutual fund churn data? In the large caps, there is a shift out of large PSU that have already performed well. There is still a lot of alpha hunting happening in the mid-caps and the small caps and it is entirely stock specific. In a market that is racked by global headwinds, it is in these mid-caps and small caps that mutual funds are looking for performance divergence with a positive twist.