How MFs churned large caps, mid-caps, and small caps in December 2024

14 Jan 2025 , 03:11 PM

LET US FIRST LOOK AT THE GROSS CHURN BY MUTUAL FUNDS

The month of December 2024 saw domestic equity funds getting the second highest net inflows of ₹41,156 Crore. However, to get a complete picture of how mutual fund flows impacted equity buying and selling; we need to look at gross purchases and redemptions in equity funds for December 2024. The net inflows into equity funds to the tune of ₹41,156 were comprised of gross purchases of ₹72,116 Crore and gross redemptions of ₹30,960 Crore. It is this total volume of ₹1,03,076 Crore that directly impacts the equity buying and selling in the market by mutual funds. Let us break up this churn into large cap, mid-cap, and small cap stocks for December 2024.

LARGE CAP STOCKS: HOW MFS CHURNED IN DECEMBER 2024

How do we classify large cap stocks for our analysis. We adhere to the AMFI definition. The top-100 stocks by market capitalization are classified as large cap stocks. This is not a static list, but it is reviewed by AMFI twice a year to ensure that definitions are current and the latest cut-off is ₹1 Trillion. Here is the large cap churn in December 2024.

Let us start with the mutual fund large cap buys first! Overall, the mutual funds added 512 Lakh shares of Jio Financial Services, 154 Lakh shares of Cipla Ltd, 128 Lakh shares of Varun Beverages, 116 Lakh shares of Indian Railway Finance Corporation (IRFC), 55 Lakh shares of Adani Power Ltd, 47 Lakh shares of JSW Energy, 40 Lakh shares of Adani Gren Energy Ltd, 31 Lakh shares of Adani Energy Solutions, and 16 Lakh shares of Macrotech Developers (Lodha). In addition, mutual funds also accumulated a small portion of Bajaj Holdings & Investments. Broadly, there are some big bets being made on relatively defensive sectors while the volume of mutual fund buying has been relatively lower in December 2024.

We now turn to major large cap selling by mutual funds in December 2024. The selling was visible in stocks as part of larger portfolio restructuring and also profit booking in select counters. Here are the major sell candidates. There was heavy selling of 358 Lakh shares in Bajaj Housing Finance, 158 Lakh shares Swiggy Ltd, 144 Lakh shares of REC Ltd, 113 Lakh shares in Dabur India, 67 Lakh shares of JSW Steel, 42 Lakh shares of Zydus Lifesciences, and 22 lakh shares of Hindustan Aeronautics Ltd (HAL). In addition, the month also saw mutual funds selling smaller quantities in Rail Vikas Nigam Ltd (RVNL), Hindustan Zinc Ltd, and ABB India Ltd. The underlying theme on the sell side appears to be taking profits off the table in the case of stocks that have rallied sharply especially some of the post-IPO names.

MID-CAP STOCKS: HOW MFS CHURNED IN DECEMBER 2024

What is the classification of mid-caps? If the top 100 stocks by market cap are classified as large cap stocks, then the 101st to 250th ranked stocks by market cap qualify as mid-cap stocks. Here is a quick look at buys and sells of mid-cap stocks by mutual funds in Dec-24.

Let us first focus on mid-cap buying in December 2024. Overall, mutual funds added 1,435 Lakh shares of Yes Bank Ltd, 156 Lakh shares of Torrent Power, 142 Lakh shares of HUDCO Ltd, 51 Lakh shares of Godrej Properties, 45 Lakh shares of Mankind Pharma Ltd, 25 Lakh shares of IREDA Ltd, 22 lakh shares of Adani Total Gas, and 18 Lakh shares of Lloyds Metals & Energy Ltd. In addition, the mutual funds also bought smaller quantities of stocks like Tata Elxsi Ltd and The New India Assurance Company Ltd in December 2024. The buying was most prominent in beaten down stocks, but was largely sector agnostic. Broadly, energy does look like a preferred mid-cap theme for mutual funds in December 2024.

We now turn to major mid-cap selling candidates during the month of December 2024. Mutual Funds sold 3,552 Lakh shares of Vodafone Idea Ltd (VI), 386 Lakh shares of Suzlon Energy Ltd, 166 Lakh shares of L&T Finance, 121 Lakh shares of Bharat Heavy Electricals Ltd (BHEL), 18 lakh shares of Motilal Oswal Financial Services, 17 lakh shares of GIC Re, 14 Lakh shares of IRCTC Ltd, and 14 Lakh shares of Tata Technologies Ltd. In addition, the month of December 2024 also saw smaller quantities of selling in Waaree Energies Ltd and Kaynes Technology India Ltd. The selling in mid-caps was relatively lighter in December 2024, and that could be more because fund action was concentrated on large cap stories. Mutual funds appear to be neutral on mid-caps considering their relatively attractive valuations.

SMALL CAP STOCKS: HOW MFS CHURNED IN DECEMBER 2024

We now turn to small cap stocks. On market cap ranking, the stocks ranked 251st and lower are classified as small caps by AMFI. Here is a gist of the buys and sells by MFs in Dec-24.

In December 2024, mutual funds added 53 Lakh shares of Suraksha Diagnostics, 49 Lakh shares of Zaggle Prepaid Ocean Services, 47 lakh shares of Wonderla Holidays, 46 Lakh shares of Yatharth Hospitals, 41 Lakh shares of TBO Tek Ltd, 18 Lakh shares of Welspun Enterprises, 18 Lakh shares of Manorama Industries, and 9 Lakh shares of Gravita India Ltd. In addition, mutual funds also purchased smaller quantities of Borosil Renewables and Taj GVK Hotels in the small cap space in December 2024.

Let us conclude our churn analysis with the small-cap selling in the month of December 2024. Mutual funds sold 181 Lakh shares of RBL Bank Ltd, 169 Lakh shares of Manappuram Finance Ltd, 22 Lakh shares of Deepak Fertilizers, 22 Lakh shares of recently listed Allied Blenders & Distillers, 18 Lakh shares of DCX Systems Ltd, 11 lakh shares of Pratap Snacks, and 10 Lakh shares of VA Tech Wabag Ltd. In addition, December 2024 also saw mutual funds selling smaller quantities in Enviro Infra Engineers, Butterfly Gandhimathi Appliances, and Knowledge Marine & Engineering Works.

Broadly, mutual funds have been relatively cautious in the market. While they have preferred to remain on the sell side in large caps, they have been relatively more neutral in mid-caps and small caps.