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

16 Jan 2023 , 07:30 AM

However, the positive feature was that the FPIs remained net buyers in the month of December. However, there is a larger story on the FPI flows. For the year 2022, FPIs showed net outflows of $16 billion. However, the year saw net outflows of $28 billion in the first half of 2022 and net inflows of $12 billion in the second half. However, despite this net selling, Nifty ended the year 5% higher. How was it possible?

The answer lies in positive inflows from domestic institutional investors, including domestic mutual funds, private insurance companies and LIC. Specifically, domestic mutual funds and LIC played a big role in buying into Indian companies to offset the impact of FPI selling. Mutual funds could manage such flows not only through churning but also because they were getting steady inflows. In December 2022, Indian mutual funds got SIP inflows of Rs13,573 crore and inflows of Rs8,416 crore via NFOs. That is a lot of money and this trend was approximately maintained in all the months of 2022. Where was that money invested?

One way to answer this question is to get a macro picture of where the flows were directed. We look at the mutual funds overall and conduct a reality check on the major stocks that were bought and sold by the mutual funds. Today, mutual funds manage nearly Rs40 trillion as AUM under active and passive equity and debt combined. $500 billion is a lot of money to play around with in a market like India with an overall market cap of $3.4 trillion. Here we look at the overall picture of what mutual funds did during the month. To avoid the risk of comparing apples and oranges, we have separately covered large cap, mid-cap and small cap stock preferences of mutual funds for December 2022.

Which large cap stocks did mutual funds buy and sell in December 2022?

How do we define large caps? For simplicity, we stick to the AMFI definition based on market cap rankings. As per the AMFI methodology, the combined universe of listed stocks on NSE and BSE are ranked descending based on market cap. Out of this list, the top-100 stocks by market capitalization (the most valuable) are classified as large cap stocks. This list is monitored and reviewed by AMFI on a half yearly basis to ensure definitions are current. Here are the major large cap stocks that mutual funds bought and sold in December 2022.

Let us start with the mutual fund large cap buys first! Overall, the mutual funds added 266 lakh shares of FSN E-Commerce Ltd (Nykaa), 51 lakh shares of Vedanta, 47 lakh shares of Dabur India Ltd, 37 lakh shares of Life Insurance Corporation (LIC) of India, 28 lakh shares of Macrotech Developers Ltd, 18 lakh shares of IRCTC Ltd and 13 lakh shares of LTI Mindtree Ltd. Apart from the above, mutual funds added smaller quantities of Adani Transmission, Adani Total Gas and Bosch in December 2022. Mutual fund activity has been relatively subdued, which is understandable considering it is the end of the year.

We now turn to major large cap selling by mutual funds in December 2022. The selling was prominent in select stocks that rallied sharply in the recent past or had shown good value traction. A total of 138 lakh shares of Tata Power were sold, apart from 54 lakh shares of HDFC Life Insurance Ltd and 46 lakh shares of Adani Enterprises Ltd. Other major stocks sold in December included 24 lakh shares of Varun Beverages, 14 lakh shares of Indus Towers, 13 lakh shares of Dr Reddy Laboratories, 12 lakh shares of Berger Paints and 7 lakh shares of Info Edge India Ltd. Mutual also funds sold smaller quantities of HZL and Tata Elxsi Ltd.

Mid-cap stock buying and selling by mutual funds in December 2022?

Let us now turn to the methodology used to classify a stock as mid-cap? As per the AMFI definition, once the top 100 stocks by market cap are classified as large cap stocks (as explained previously), the 101st to 250th ranked stocks by market cap would qualify as mid-caps. Here are the mid-cap stocks mutual funds bought and sold in December 2022.

Let us first focus on the mid-cap buying in December 2022. Overall, mutual funds added 1,144 lakh shares of Vodafone India, 200 lakh shares of Bank of India, 166 lakh shares Steel Authority of India Ltd (SAIL), 127 lakh shares of L&T Finance Holdings Ltd, 118 lakh shares of NMDC Ltd and 82 lakh shares of GMR Airport Infrastructure. Mutual Funds also added 37 lakh shares of PB Fintech, 18 lakh shares of One97 Communications Ltd (Paytm), 17 lakh shares of Nippon Life AMC and 7 lakh shares of HDFC AMC. The mid-cap buying was focused on alpha seeking, targeting value proposition with momentum.

We now turn to major mid-cap selling. In December 2022, Mutual Funds sold 85 lakh shares of BHEL, 62 lakh shares of Petronet LNG, 32 lakh shares of Gujarat Gas, 31 lakh shares of Poonawala Fincorp, 27 lakh shares of Biocon Ltd, 24 lakh shares of Aurobindo Pharma and 21 lakh shares of Ramco Cements Ltd. In addition, mutual funds also sold smaller quantities of companies like LTTS, Godrej Properties and Shriram Finance (formed by the merger of Shriram Transport Finance and Shriram City Union Finance).

Small cap stocks that mutual funds churned in December 2022

Finally we turn to the small cap stocks. On market cap ranking, the stocks ranked 251st and lower are classified as small caps by AMFI. We will use that definition for our rankings also. Here is a quick snapshot of some of the key small cap stocks where mutual funds were active in December 2022. Typically, small caps and mid-caps tend to outperform large caps when the undertone of the market is bullish.

In December 2022, mutual funds added 138 lakh fresh shares of Jindal Stainless, 47 lakh shares of Sapphire Foods, 34 lakh shares of VRL Logistics, 32 lakh shares of PCBL ( formerly Phillips Carbon Black Ltd) and 32 lakh shares of Rainbow Children’s Medicare Ltd. In addition, small cap stocks purchased included 30 lakh shares of Jubilant Ingrevia, 21 lakh shares of GMM Pfaudler Ltd and 8 lakh shares of GNFC. Mutual funds also added smaller quantities of Elantas Beck and Ethos Ltd during the month of December 2022.

Finally, let us look at small-cap selling in December 2022. Mutual funds sold 28 lakh shares of Greaves Cotton, 28 lakh shares of Amara Raja Batteries, 27 lakh shares of Praj Industries, 20 lakh shares of Gujarat Industrial Power, 15 lakh shares of Himatsingka Seide and 12 lakh shares of Action Construction Equipment. In addition, mutual funds also sold smaller quantities of select small cap stocks including Mazagon Dock Shipbuilders, Siyaram Silk Mills, Sunteck Realty and Maharashtra Seamless Ltd.

What are the major takeaways that emerge from the December 2022 mutual fund churn data? In the large caps, there is a shift into new age digital stocks and realty while selling out of sterling performers in the recent past. There is still a lot of alpha hunting visible in the mid-caps and the small caps and that is predominantly stock specific. It must be said that the mutual funds have capitalized on the volatility, to tweak the portfolios across the board.