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

23 Jun 2022 , 01:57 PM

When mutual funds invest in stocks, they normally spread it across large caps, mid-caps and small caps. While the large caps give the beta and the stability to the portfolio, it is the mid-caps and the small caps that normally give them the alpha. Of course, we are talking about the diversified and multi-cap funds. However, there are dedicated mid-cap and small cap funds that specialize only in these categories.

May 2022 has been another month of robust flows into equity funds with SIPs back to robust March 2022 levels. The logical question is; what did it translate into? One of the reasons stock markets have not fallen vertically, despite heavy FPI selling, is that domestic mutual funds provided support to the markets while FPIs were selling. That comes from the strength of flows into equity funds. But it is now time to scratch the surface and look at what these funds actually bought and sold across various capitalization categories. Here we specifically focus on the mutual fund buy and sell action in May 2022 across large caps, mid-caps and small caps; with each segment looked at separately.

Large cap stocks that mutual funds bought and sold in May 2022

Let us begin with the large cap story!Large caps adhere to the traditional AMFI definitionbased on market cap  rankings. The universe of listed stocks on NSE and BSE are ranked descending on market cap. The top-100 stocks by market cap are classified as large cap stocks. Here is a quick summary of the large cap stocks that mutual funds bought and sold in the month of May 2022.

First, the large cap buying in May 2022.Overall, the mutual funds added 539 lakh shares of ONGC, 366lakh shares of Infosys, 224 lakh shares of Hindalco, 92 lakh shares of SBI Cards, 80 lakh shares of Tech Mahindra, 69 lakh shares of JSW Steel and 64 lakh shares of Dabur India. In addition, mutual funds added smaller quantities of HDFC AMC, Bajaj Finserv and Jubilant Food works. There seems to have been a lot of buying in the correction. Some specific stocks that attracted interest after a sharp fall were ONGC, Infosys, Hindalco, JSW Steel and Dabur. Most stocks have corrected sharper than the Nifty, opening new vistas.

Let us now turn to the large cap selling. There was a tendency to churn and sell out where there were profits plus hazy future guidance. A total of 744 lakh shares of SAIL were sold. In addition,373 lakh shares of Indian Oil, 226 lakh shares of Zomato Ltd, 105 lakh shares of Zydus Health, 63 lakh shares of UPL and 26 lakh shares of Indus Towers were sold in May 2022. In addition, mutual funds sold smaller quantities of IRCTC, Piramal Enterprises, JSW Energy and Hindustan Zinc during the month of May 2022. The selling was focussed on taking profits off the table in stocks that had shown good traction or where the visibility was not too encouraging like Zomato, SAIL, Indian Oil Corporation etc.

Mid-cap stocks that mutual funds bought and sold in May 2022

Let us turn to mid-cap stocks, but first the methodology to determine if a stock is mid-cap. If the top 100 stocks by market capitalization, as explained earlier, are classified as large cap stocks; then the 101st to the 250th rank are classified as mid-cap stocks. Here is a quick look at the mid cap stocks that mutual funds bought and sold in May 2022.

In May 2022, mutual funds overall added 410 lakh shares of Vodafone Idea, 102 lakh shares of L&T Finance Holdings, 35 lakh shares of CG Power, 21 lakh shares of Escorts Kubota and21 lakh shares of Laurus Labs.In addition, MFs also added smaller quantities of Alkyl Amines, Devyani International, Sundaram Finance and Navin Fluorine. Mutual funds have been zeroing in on Vodafoneand L&T Finance Holdings as sharp turnaround plays. There was once again a lot of value buying seen in stocks that have corrected sharply.

Let us turn to the major mid-cap selling in May 2022. About 269 lakh shares of Punjab National Bank were sold in the month. In addition, MFs sold82 lakh shares of Aditya Birla Capital, 52 lakh shares of Varun Beverages, 51 lakh shares of Petronet LNG, 116 lakh shares of Jindal Steel & Power, 17 lakh shares of ACCand 68 lakh shares of Canara Bank in May 2022. In addition, there was also selling in Ruchi Soya and Deepak Nitrite. The theme appeared to be to stay light on mid-caps where news flows were not exactly encouraging, and most of them are more vulnerable to volatility in exchange rates and oil prices.

Small cap stocks that mutual funds bought and sold in May 2022

Finally we come to the small cap category. On the market capitalization ranking, the stocks ranked 251st and lower are classified as small caps by AMFI. Here we look at the key small cap stocks that mutual funds were most active in May 2022.

In May 2022, mutual funds added 129 lakh shares of RBL Bank, 22 lakh shares of PCBL (Phillips Carbon Black), 19 lakh shares of Go Fashion, 10 lakh shares of Mirza International and13 lakh shares of JK Paper. Mutual funds added smaller quantities of Maharashtra Scooters, Tatva Chintan Pharmachem, Insecticides India, Route Mobile and Nazara Tech.

Finally, let us turn to the small-cap selling in May 2022. About 63 lakh shares of Indiabulls Real Estate were sold in May 2022. In addition, MFs sold26 lakh shares of India Cement, 25 lakh shares of Chennai Petroleum, 21 lakh shares of Ashiana Housing, 18 lakh shares of Jindal Stainless and 11 lakh shares of Intellect Design Arena. In addition, mutual funds also sold smaller quantities of Polyplex Corp, Mastek Ltd, Caplin Point Laboratories and Amara Raja Batteries.

How exactly do we sum up the May2022 MF stock selection story?There was a rush to churn portfolios with the bias towards profit making mid-caps and small caps as well as the urgency to get out of stagnating stocks. More of the value digging was seen in the large caps with mutual funds cautious on mid-caps and small caps due to their inherent vulnerability to the vagaries of exchange rate fluctuations and oil prices.