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

13 Dec 2024 , 12:22 PM

GROSS CHURN MATTERS MORE THAN NET FLOWS FOR MFs

The month of November 2024 saw ₹62,095 Crore of net inflows into Indian mutual funds across categories. For the month of November 2024, domestic equity funds saw net inflows of ₹35,944 Crore. However, net inflows do not give us a complete picture of how much the mutual fund flows would have impacted equity buying and selling. For that we need to look at the gross purchases and redemptions in equity funds for November 2024. The net inflows into equity funds to the tune of ₹35,944 were comprised of gross purchases of ₹61,697 Crore and gross redemptions of ₹25,753 Crore. It is this total volume of ₹87,450 Crore that directly impacts the equity buying and selling in the market by mutual funds. Let us see how the mutual funds churned large cap, mid-cap, and small cap stocks in the month of November 2024.

LARGE CAP STOCKS: HOW MFS CHURNED IN NOVEMBER 2024

We adhere to the standard AMFI definition based on market cap rankings to classify large cap, mid cap, and small cap stocks. Under the AMFI methodology, the combined universe of listed stocks on NSE and BSE are first ranked descending on market capitalization, with the exchange selection based on the higher volumes of average trades. From this list, 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 the definitions are current. Here are the major large cap stocks that the Indian mutual funds bought and sold in the month of November 2024.

Let us start with the mutual fund large cap buys first! Overall, the mutual funds added 2,003 Lakh shares of Zomato Ltd, 1,464 Lakh shares of Punjab National Bank, 295 Lakh shares of Varun Beverages Ltd, 234 Lakh shares of Adani Ports SEZ, 219 Lakh shares of IndusInd Bank, 81 Lakh shares of Bajaj Finserv Ltd, 40 Lakh shares of Adani Energy Solutions Ltd, 35 Lakh shares of Trent Ltd, and 11 Lakh shares of Hindustan Zinc Ltd. In addition, mutual funds also accumulated a small portion of Adani Total Gas Ltd. Interestingly, there seems to be a lot of interest among mutual funds in the Adani group stocks, where the stocks appear to have been sharply beaten down after the recent sell-off following the order of the US SEC and the US Department of Justice. Zomato and PNB have been on the top buy list of mutual funds for quite a few months now.

We now turn to major large cap selling by mutual funds in November 2024. The selling was visible in stocks as part of the larger portfolio restructuring, which is quite normal amidst volatility in the markets. Let us look at the major sell candidates. There was heavy selling of 609 Lakh shares in HDFC Bank Ltd, 480 Lakh shares Power Grid Corporation, 38 Lakh shares of HCL Technologies, 33 Lakh shares in Adani Enterprises, 22 Lakh shares of Tech Mahindra, 17 Lakh shares of JSW Energy Ltd, 14 Lakh shares of Hindustan Aeronautics Ltd (HAL), and 14 Lakh shares in Zydus Life Sciences Ltd. These were the primary sell candidates. In addition, the month of November 2024 also saw selling in smaller quantities in stocks like Grasim Industries Ltd and Macrotech Developers Ltd (Lodha). The underlying theme on the sell side appears to be taking profits off the table in the case of stocks that have rallied sharply in the last few months. In any volatile market, profit booking is always a good idea.

MID-CAP STOCKS: HOW MFS CHURNED IN NOVEMBER 2024

Let us quickly get into the AMFI methodology pertaining to the classification of mid-caps? As discussed in the previous point, the top 100 stocks by market cap are classified as large cap stocks. Once that list is exhausted, the 101st to 250th ranked stocks by market cap will qualify as mid-cap stocks under the AMFI definition. Here are the mid-cap stocks mutual funds bought and sold in the month of November 2024; showing churn on both sides.

Let us first focus on mid-cap buying in November 2024. Overall, mutual funds added 183 Lakh shares of Yes Bank Ltd, 141 Lakh shares of Aditya Birla Capital, 125 Lakh shares of Indraprastha Gas Ltd (IGL), 110 Lakh shares of Marico Ltd, 76 Lakh shares of HUDCO, 36 Lakh shares of KEI Industries Ltd, and 11 Lakh shares of Colgate Palmolive India Ltd. In addition, the mutual funds also bought smaller quantities of stocks like Mazagon Docks Ship Builders Ltd, ZF Commercial Vehicle Control Systems Ltd, and Cochin Shipyards Ltd in the month of November 2024. The buying was most prominent in beaten down defence and BFSI stocks during the month of November 2024. These two sectors accounted for half of the top 10 buys in the mid-cap space in November 2024.

We now turn to major mid-cap selling candidates during the month of November 2024. Mutual Funds sold 1,640 Lakh shares of Vodafone Idea Ltd (VI), 266 Lakh shares of National Aluminium Company Ltd (NALCO), 81 Lakh shares of Voltas Ltd, 52 Lakh shares of Oberoi Realty Ltd, 15 Lakh shares of Coforge Ltd, 14 Lakh shares of Alkem Laboratories Ltd, and 12 Lakh shares of BSE Ltd. In addition, the month of November 2024 also saw smaller quantities of selling in Godrej Properties and Tata Technologies Ltd.

The selling in mid-caps was relatively lighter in November 2024, and that could be largely because most of the fund action was concentrated on the large cap stories. However, the selling in Vodafone was quite steep, considering that the company is currently desperate for funds. Also, many mutual funds are finding mid-caps attractively priced after the correction. Many of these mid-caps are now available at more compelling valuations that a few months back.

SMALL CAP STOCKS: HOW MFS CHURNED IN NOVEMBER 2024

We now turn to small cap stocks and their definition for the purpose of the churn analysis, once again, adheres to the SEBI definition. On market cap ranking, the stocks ranked 251st and lower are classified as small caps by AMFI. Here is a quick snapshot of key small cap stocks where mutual funds were active on the buy side and on the sell side in November 2024. Micro caps are normally kept out of the ambit of small caps discussion here.

In November 2024, mutual funds added 71 Lakh shares of Wockhardt Ltd, 53 Lakh shares of Equinox India Developments Ltd, 43 Lakh shares of Welspun Corp Ltd, 29 Lakh shares of Five Star Business Finance, 21 Lakh shares of Mahanagar Gas Ltd (MGL), 21 Lakh shares of Nazara Technologies, 15 Lakh shares of JTL Industries, and 12 Lakh shares of Chennai Petroleum. In addition, mutual funds also purchased smaller quantities of small cap stocks like MOIL Ltd and Protean e-Gov Technologies Ltd in the month of November 2024. Overall, the addition of small caps were quite muted in the month, which is not surprising considering the high level of macro risks inherent at current levels. It was more like selective nibbling.

Let us conclude our churn analysis with the small-cap selling in the month of November 2024. Mutual funds sold 67 Lakh shares of Electrosteel Castings Ltd, 39 Lakh shares of Apeejay Surrendra Park Hotels, 38 Lakh shares of Honasa Consumer Ltd (Mamaearth), 24 Lakh shares of BLS International Services Ltd, 15 Lakh shares of Zaggle Prepaid Ocean Services Ltd, and 12 Lakh shares of Camlin Fine Sciences Ltd. In addition, the month of November 2024 also saw mutual funds selling smaller quantities in small cap stocks like Indegene Ltd, PSP Projects Ltd, IRCON International Ltd, and DCL Shriram Ltd.

Last, but not the least, here are some key takeaways from the buying and selling data of mutual funds in the month of November 2024. The churn appears to be a case of funds taking profits out of the stocks that have rallied sharply and reallocating to the beaten down stocks. That is a logical move, especially when investors are preferring to move towards safety amidst the volatile global scenario and the far reaching changes like in global trade once Donald Trump takes charge. The war in Ukraine is worsening, West Asia is still volatile and now Syria is posing a big question mark. Amidst these challenges, Indian markets have also got to live with currency pressures as China weakens the Yuan. Hopefully, the fund managers are trying to get their churn logic right, this time around!