8 mins read . 20 Jun 2023
For the month of May 2023, the net flows into equity funds were to the tune of Rs 3,240 crore. That sounds paltry and that means funds would not have been too active in equity stocks, right? No, wrong! Equity buying and selling by mutual funds is not determined by the net flows but by the gross flows. For instance, in the month of May 2023, the gross inflows into equity funds were more than Rs31,000 crore while redemptions were around Rs28,000 crore. So, that is a lot of money that has been received at a gross level and churned. Mutual funds don’t just buy equities based on net flows of funds but they also churn equities based on profit booking in other counters. Here we look at the stock that mutual fund bought in May 2023 and the possible reasons for the same. We first look at the macro view of the fund industry overall and then look at top five funds. After it is all about gross, and not net.
Let us start with the mutual fund large cap buys first! For May 2023, domestic mutual funds overall added about 7 crore shares of Zomato and 2.45 crore shares of FSN Ecommerce Ventures Ltd (Nykaa). In the last few months, funds have been nibbling away at digital plays, which are still way below their IPO prices. With the HDFC group merger and restructuring underway, mutual funds are betting on value accretion of the group but also spreading their exposure. Funds bought 1.87 crore shares of HDFC Life Insurance and 1.70 crore shares of HDFC Ltd. Finally, the funds also went long on metal plays buying 1.30 crore shares of Hindalco and 58 lakh shares of JSW Steel. They expect the demand for metals to surge on the back of robust China demand as well as domestic demand from automobiles and the construction and infrastructure sectors.
What were the mid-cap and small cap themes that mutual funds bought into in the month of May 2023? There was a lot of bottom fishing with mutual funds adding 8.16 crore shares of Vodafone Idea on revival hopes and 2.23 crore shares of IDFC First Bank; as the best play on the growing banking sector. Mutual funds also added other mid-cap stocks like Vedant Fashions, Aditya Birla Capital, Laurus Labs and PB Fintech (Policybazaar). On the small cap front, the focus more on alpha hunting. Mutual fund bet on defence through Astra Microwave and on the cathode demand through Graphite India. In the healthcare space, Marksans Pharma has emerged a favourite while mutual funds also bought into Amara Raja Batteries, following its aggressive expansion plans in the lithium battery segment.
What did SBI Mutual Fund buy in the month of May 2023? Among the large-cap accretions made by the fund, it had added substantial positions in HDFC Ltd. The fund also added smaller quantities of stocks like ICICI Bank, Infosys, Bharti Airtel, and Larsen & Toubro. Did SBI MF add any of the smaller-sized stocks to its portfolio. In fact, the fund did add several smaller-sized stocks. Key among the stocks it added in May 2023 for alpha includes Mankind Pharma, Gland Pharma, Zee Entertainment, Voltas Ltd and Indus Towers. Clearly, SBI MF appears to be betting big on mid-sized pharma companies in India.
What did ICICI Prudential Mutual Fund buy in the month of May 2023? Among the large-cap accretions made by the fund, it had added substantial positions in L&T and Sun Pharma. The fund also added smaller quantities of stocks like Infosys and ICICI Bank. Did ICICI Prudential MF add any of the smaller-sized stocks to its portfolio. In fact, the fund did a number of smaller-sized stocks. Key among the stocks it added in May 2023 for alpha includes Metropolis Health, Shriram Finance, MRF, Page Industries and Manyavar. Stock picks in the mid and small-sized segments have been largely sector agnostic.
What did HDFC Mutual Fund buy in the month of May 2023? Among the large-cap accretions made by the fund, it had added substantial positions in parent HDFC Ltd. The fund also added smaller quantities of stocks like HDFC Bank, Infosys, and Reliance Industries. Did HDFC Mutual Fund add smaller-sized stocks to its portfolio for alpha? Key among the smaller-sized stocks it added in May 2023 for alpha includes Mankind Pharma, Global Health (Medanta), Shoppers Stop and Gland Pharma. Like in the case of SBI MF, HFDC MF also appeared to prefer small-sized segments of healthcare stocks.
Nippon Mutual Fund added substantially to its positions in NTPC and Axis Bank, but it remained smaller in most of the other large-cap stocks. Among the mid-sized stocks for Alpha, Nippon India Mutual Fund was a buyer in Mankind Pharma, Astra Microwave, Exide Industries, Jubilant Foodworks and JTEKT India. The theme is a mix of defence, healthcare and QSRs and batteries.
In May 2023, UTI added to its positions in Reliance Industries, HDFC Ltd, Axis Bank and TCS, which looks like a fairly strong open interest. Among smaller companies that the bank accumulated in the month, it had added to its stake in Indian Bank, IDFC Ltd, Biocon Ltd, M&M Financial Services and Adani Enterprises.
Broadly, mutual funds showed large cap preference for HDFC Ltd and in the mid-caps, the interest focus was largely on healthcare, defence, and green energy.
Data Source: AMFI