How Indian MFs stacked up on AUM as of Nov-20
The chart below captures the equity fund AUM and the overall AUM of the top funds with overall AUM in excess of Rs200,000cr.
In the last two quarters, SBI Mutual Fund has clearly consolidated its position as the largest mutual fund by AUM by a fairly large margin. Interestingly, after a very long time in November 2020, ICICI Prudential AMC overtook HDFC MF to become the second largest AMC in India; albeit by a small margin. It is after a very long time that HDFC MF has fallen to the rank of third largest AMC in terms of AUM.
While the top 3 funds are almost at par in debt AUM, it is in equity AUM that SBI MF scores over the other funds by a huge margin. The top 10 funds in terms of AUM account for nearly 85% of the total AUM of the Indian mutual fund segment.
What are the top Nifty stocks bought and sold by MFs in Nov-20?
Mutual funds reduced their stake in 40 stocks and raised stake in just 10 of the Nifty stocks. This dichotomy is evident from MF ending up being net sellers on most of the days in November. This MF selling has been partially triggered by concerted profit booking at higher levels and partially by net redemption pressure of Rs12,987cr in equity funds by investors. Here is a quick take on the top additions and reductions in Nifty stocks.
With just about 20% of the stocks seeing an increase in MF stake, and a limited cache of funds, mutual funds had to be selective in their stock choices. The most sought-after stock was Adani Ports followed by Reddy Labs and HCL Tech. Adani Ports was a high beta play on the macroeconomic recovery. Reddy Labs and HCL Tech are emerging as relatively defensive bets in the post-COVID scenario even as Maruti and Grasim are offering value relative to historical valuations.
The selling by MFs was most pronounced where the rally had been rapid and steep. There were concerns of exposure to Bajaj Finserv when most of the funds already owned Bajaj Finance. Also the holding company discount would play out at some point. IndusInd Bank was a clear case of exiting a multi-bagger. Even stocks like Tata Steel had played out the China recovery story for too long. Interestingly, MFs also took profit out from long term outperformers like Nestle and Tech Mahindra during the month.
MFs built non-Nifty positions in two themes in Nov-20
While we have seen what Indian mutual funds bought / sold in the Nifty universe, there is a much larger universe of stocks that MFs are active in. There were broadly two themes that attracted buying from mutual funds in Nov-20. Firstly, smaller banks attracted a lot of attention after RBI showed alacrity in rescuing LVB. During Nov-20, Indian Mutual Funds added substantially in smaller banks like Federal Bank (+5.46cr shares), Bank of Baroda (+1.42cr shares), Equitas SFB (+1.21cr shares), IDFC First Bank (+0.92cr shares), DCB Bank (+0.55cr shares) and RBL Bank (+0.54cr shares).
The second theme where mutual funds added stocks was PSUs, which are emerging as value plays. MFs added REC, Bharat Electronics as well as a string of PSU banks in November.
What did MF sell among non-Nifty stocks in Nov-20?
Mutual funds were a lot more theme-agnostic when it came to selling in non-index stocks. The broad principle appeared to be to take profits out wherever there had been a sharp rally in the recent past. Some of the major stocks sold by MFs in November included BHEL (-5.39cr shares), Ambuja Cements (-1.60cr shares), Tata Consumer Products (-1.49cr shares), JSW Energy (-1.19cr shares), GMR Infra (-1.05cr shares) and L&T Finance Holdings (-1.01cr shares).
There were also a number of mid-cap stars where MFs trimmed their positions principally after a sharp rally in recent times. These included stocks like Trent, Biocon, Cipla, Interglobe Aviation, PI Industries, Laurus Labs, Muthoot Finance and Marico.
To sum it up, the month of November 2020 has been biased towards mutual fund selling. That was due to a mix of heavy outflows from equity funds and also elevated levels facilitating profit booking.