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Large cap, mid-cap, and small caps that MFs traded in June 2023

15 Jul 2023 , 03:04 PM

With the FPIs infusing $5.3 billion into Indian equities in May and $5.7 billion in June, it was a good $11 billion in just 2 months. Obviously, the domestic mutual funds did not have much to do. Even as the SIP flows continued to be robust in the month of June 2023, the NFOs were largely restricted to the equity funds only. April and May 2023 had been all about debt funds with inflows of nearly Rs1.70 trillion coming into debt funds in these 2 months. However, the debt fund flows again turned negative in June 2023 due to quarter end tax considerations while the flows into equity funds more than doubled.

June 2023 saw robust SIP flows and substantial equity churn

One can say that NFO flows were almost negligible in the month of June 2023 at about Rs3,228 crore. However, SIP flows at Rs14,734 crore was almost at par with the previous month. In short, the mutual funds had enough of net cash ammunition to invest in the equity markets. However, that was not the real story. The real story was about the persistent churn in equities that mutual fund had to do because of the churn in equity fund flows. Let us understand why! The net flows of Rs8,638 crore into equity funds may appear to be quite small. However, this was driven by Rs38,042 crore of gross equity fund inflows and Rs29,404 crore of gross MF redemptions. When you are up against that volume of inflows and outflows, equity churn by the mutual funds was almost inevitable. This is just the active equity funds and we are not even counting the equity holdings in hybrid funds and passive funds, but we will leave that aside for now.

With gross SIP flows at Rs14,734 crore, almost at par with the peak flows, the turnstiles kept humming. Also, the month promised a high level of retail participation as evidenced by a sharp accretion in the number of folios and the AUM of SIP holdings. If one looks at the overall AUM of mutual funds, it touched Rs44.39 trillion for the first time ever. AUM is a combination of flows and accretion in market value. The AUM surge in June 2023 was largely driven by accretion in equity valuations due to a spike in the index levels. Both the Nifty and the Sensex closed June almost at their all-time high levels.

Now that equity funds were aggressively churning their portfolios in June 2023, the million dollar question is what did they buy and what stocks did they sell. Flows into equity funds have a multiplier effect on mutual fund churn as fund managers also use higher levels of the index to restructure their fund portfolios. Here we look at a granular picture of mutual fund portfolio churn, based on market capitalization of stocks.

Large cap stocks churned by mutual funds in June 2023

How exactly do we define large caps? For simplicity, we stick to the AMFI definition based on market cap rankings. According to the AMFI methodology, firstly the combined universe of listed stocks on NSE and BSE are ranked descending based on market capitalization. From this list, the top-100 stocks by market capitalization are classified as large cap stocks. This list is reviewed by AMFI on a half yearly basis to ensure definitions are up to date. Here are major large cap stocks mutual funds bought and sold in June 2023.

Let us start with the mutual fund large cap buys first! Overall, the mutual funds added 866 lakh shares of Coal India Ltd, 174 lakh shares of HDFC Ltd, 110 lakh shares of Jindal Steel & Power Ltd (JSPL), 61 lakh shares of JSW Ispat Ltd, 22 lakh shares of LIC of India, 19 lakh shares of Adani Enterprises Ltd, 9 lakh shares of Bajaj Auto Ltd and 4 lakh shares each of Adani Green Energy Ltd and IRCTC Ltd. Apart from the above, mutual funds added smaller quantities of Adani Transmission Ltd too. Interestingly, there seems to be a lot of interest among mutual funds in buying commodity stocks while interest in the Adani group stocks is also building up once again.

We now turn to major large cap selling by mutual funds in June 2023. The selling was prominent in the stocks that had rallied sharply in the recent past, especially some specific stories like HAL and the insurance players. Let us look at the major sell candidates. There was heavy selling of 125 lakh shares in Wipro Ltd. In addition, a total of 80 lakh shares of HDFC Life Insurance, 69 lakh shares of Adani Ports & SEZ, 47 lakh shares of ICICI Prudential Life Insurance, 45 lakh shares of Hindustan Aeronautics, 21 lakh shares of Hindustan Zinc Ltd, 15 lakh shares of Havells India Ltd and 11 lakh shares of Britannia Industries Ltd were sold in June 2023. Apart from these, mutual funds also sold smaller quantities of Dr. Reddy’s Labs and Siemens Ltd in June 2023.

Mid-cap stocks churned by mutual funds in June 2023

Let us quickly revisit the AMFI methodology to classify a stock as mid-caps? Under the AMFI definition, once the top 100 stocks by market cap are classified as large cap stocks, the 101st to 250th ranked stocks by market cap would qualify as mid-caps. Here are the mid-cap stocks that mutual funds bought and sold in June 2023.

Let us first focus on mid-cap buying in June 2023. Overall, mutual funds added 329 lakh shares of NMDC Ltd, 273 lakh shares of Indus Towers, 134 lakh shares of Bank of Maharashtra, 105 lakh shares of Oil India Ltd, 102 lakh shares of HDFC Asset Management Company, 99 lakh shares of Shriram Finance Ltd, 54 lakh shares of IIFL Finance, 41 lakh shares each of Star Health & Allied Insurance, 39 lakh shares of Timken India Ltd and 7 lakh shares of Colgate Palmolive India Ltd. The buying was most prominent in beaten down stocks during the month of June 2023 in the mid-cap space.

We now turn to major mid-cap selling. In June 2023. Mutual Funds sold 408 lakh shares of L&T Finance Holdings Ltd, 176 lakh shares of Indian Hotels, 140 lakh shares of Max Healthcare, 118 lakh shares of Bandhan Bank, 82 lakh shares of Aditya Birla Capital, 63 lakh shares of Gujarat Gas Ltd, 22 lakh shares of PB Fintech (Policybazaar) and 20 lakh shares of Tata Chemicals Ltd. In addition, the month also smaller quantities of selling in Godrej Properties Ltd and Dixon Technologies Ltd. The selling in mid-caps was much heavier in June 2023, and it could be due to the recent rally. Also, mid-caps have been outperformers in the last one year, giving more room to mutual funds to take profits off the table.

Small cap stocks churned by mutual funds in June 2023

We now turn to the small cap stocks. 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 in June 2023. 

In June 2023, mutual funds added 601 lakh fresh shares of Suzlon Ltd, 253 lakh shares of TD Power Systems Ltd, 216 lakh shares of Kalyan Jewellers, 76 lakh shares of MRPL Ltd, 67 lakh shares of Aether Industries Ltd and 52 lakh shares of Piramal Pharma Ltd. In addition, mutual funds also purchased smaller quantities of small cap stocks like Orchid Pharma, Karnataka Bank and 360 One Wealth Management; apart from investing in the IPO of IKIO Lighting Ltd during the month of June 2023.

Let us conclude with the small-cap selling in the month of June 2023. Mutual funds sold 115 lakh shares of Hindustan Construction, 63 lakh shares of Rain Industries, 37 lakh shares of Global Health (Medanta), 30 lakh shares of Heidelberg Cement, 19 lakh shares each of Pricol Ltd, 15 lakh shares of Railtel Corporation Ltd and 6 lakh shares of Elin Electronics. In addition, the month of June 2023 also saw mutual funds selling smaller quantities of stocks like Aarti Pharmalabs, Anupam Rasayan Ltd and Aditya Birla Sun Life AMC Ltd.

Finally, for some major takeaways from the buying and selling data of mutual funds in the month of June 2023? The churn appears to be a case of fund staking profits out of the rallying stocks and reallocating to the beaten down stocks. Markets peaks are generally the right time to restructure the portfolio in favour of the future paradigm. That is exactly what the funds have been doing in June 2023.

Related Tags

  • Foreign portfolio investors
  • FPIs
  • large caps
  • MFs
  • mid caps
  • mutual funds
  • small caps
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