What stocks did leading mutual funds buy and sell in Oct-20?

Mutual funds are overweight on capital goods, telecom and consumer plays but underweight on banking, financials and hydrocarbons.

Nov 19, 2020 08:11 IST India Infoline News Service

With overall mutual fund flows at Rs28.2 trillion, the key drivers appear to be debt fund flows and equity price appreciation. While SIP flows into equities have sustained below Rs8,000cr on a monthly basis, the real offloading is happening in lump-sum equities. However, total net selling in equities over last 4 months is less than Rs10,000cr, so nothing to really fret about! The message is; fund managers and CIOs are using the rally to rotate their portfolio and diversify better. The chart below captures the 8 largest AMCs in India.

Data Source: AMFI

Some large caps were preferred but some were shunned

Let us start with the preferred large-cap buys and sells across funds. Mutual funds predominantly bought into Godrej Consumer, Avenue Supermarts, Reddy Labs, Berger Paints, Bajaj Autoand Bandhan Bank. But it was not just buying all the way. Mutual funds overall sold out of stock like PNB, HDFC AMC, Wipro, Bank of Baroda, SBI Cards, Eicher Motors etc. The selling was determined by the decision to reduce allocation to financials and book profits in stocks that have rallied.

To summarize sectorally, mutual funds are overweight on capital goods, telecom and consumer plays but underweight on banking, financials and hydrocarbons. Reliance was on the sell list of most mutual funds. That is not surprising considering most mutual funds are close to their maximum permissible limits in Reliance and other large private banks.

Mid caps and small caps were more sector agnostic

In the mid-cap space the MFs preferred niche plays like agri and microfinance; apart from betting on growth revival. Mutual funds purchased mid-caps like Sumitomo Chemicals, Vodafone, Polycab, Dalmia Bharat and CreditAcess Grameen. The theme was to play the rural-cum-revival story via mid caps. The selling in mid-caps has been a lot more sector-agnostic. One could witness selling in Canara Bank, BHEL, Shriram Transport, Mindtree, GSK Pharma and Glenmark.

The small cap saw some surprising buys. Graphite was a bet on steel, Just Dial on digital and ABB Power on its niche post demerger. MFs were also seen to be exiting other storieslike CARE Ratings, Cochin Shipyard, Thyrocare, MCX and Amber Enterprises.

Over to the leader;what SBI Mutual Fundbought and sold in Oct-20?

With an AUM closing in on Rs422,000cr, SBI is the largestIndian mutual fund by a margin. It sets the trend for MFs as its equity AUM is substantially larger than the others. For Oct-20, SBI MF was a big buyer in Reliance Industries Rights Entitlements. Despite average results, SBI enhanced its stake in Lupin as well as in retailing giant, Avenue Supermarts. Clearly, SBI is betting on a big retail revival as demand picks up steam. Apart from these big buys, SBI also bought SRF as a play on specialty chemicals and Happiest Minds via the IPO. SBI MF was a key seller in heavyweights like HDFC Bank, HDFC, Reliance Industries, Infosys and L&T.

What HDFC Mutual Fund traded in Oct-20

With an AUM of Rs375,000cr and long-time market leadership, HDFC MF is an opinion maker. HDFC made big bets on Bharti Airtel, lapping up Rs260cr worth of the stock. Apart from Bharti Airtel, the two other major buys of HDFC MF were Hindustan Unilever and TCS. After a long time, HDFC MF was active in auto stocks investing Rs120cr in Maruti. HDFC was also a buyer in HDFC Life. However, they sold Tata Steel and Tata Motors after the recent rally. In addition, HDFC MF also sold out ofHDFC Bank, RIL and SBI Cards. In fact, the selling list was almost common between SBI MF and HDFC MF. With the former SBI MF CIO joining as the CEO of HDFC MF, it remains to be seen how the fund strategy changes.

ICICI Prudential MF was also active in Oct-20

Like SBI Mutual Fund, ICICI Prudential was also seen adding Avenue Supermarts to its portfolio with the retail plans of RIL/FEL caught in the Amazon turf war. However, in contrast to HDFC MF and SBI MF, ICICI Prudential was a major buyer in Reliance Industries. ICICI Prudential was also a major buyer in TCS infusing close to Rs150cr into the stock during the month. Even as ICICI Pru MF spruced up its holdings in L&T, it sold out of financials like HDFC, ICICI Bank and HDFC Bank in Oct-20.

Aditya Birla MF had a pharma preference in Oct-20

Aditya Birla Mutual Fund had logged into pharma stocks like Reddy Labs and Lupin. In addition, Birla MF was also a buyer in Bajaj Finance, Ambuja Cements and the recent IPO of CAMS. Birla MF was a consistent seller in stocks like HDFC, Axis Bank and Reliance Industries; apart from selling FMCG majors like Hindustan Unilever and ITC.

In short, it has been a month of varied buying stories but selling has been pronounced across financials in general and Reliance Industries in particular.

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