Top 8 AMCs have these 4 largecaps in their portfolio

 Infosys fired almost on all cylinders in June quarter earnings, which gave confidence to investors and as a result six out of 10 fund houses raised exposure to the stock last month.

 

Mutual funds, also known as asset management companies (AMCs), are key investors in equity markets. They put investors' money in several segments, including equities and debts. In the last few years, whenever the market corrected sharply, they remained supportive.

But, in the last couple of months, they have been net sellers, probably preferring to book profits given the 50 percent rally in markets from March lows. In the last two months, MFs sold nearly Rs 11,000 crore worth of shares, including Rs 7,232 crore in July.

Foreign institutional investors (FIIs), however, were net buyers, who bought nearly Rs 32,000 crore worth of shares in the two-month period, including Rs 8,590.13 crore in July. If we go back a bit more, FIIs have been net buyers in the April-July period.

The market rose more than 7 percent in June as well as July. It seems to have priced in all positives given the data points published during the unlocking period and June quarter earnings report card along with major liquidity boost, experts say.

Given the rally, mutual funds rejigged their exposure to some stocks but four bluechips—Reliance Industries, Infosys, HDFC Bank and ICICI Bank— have remained a constant in their holdings.

The country's second-largest IT services company Infosys and top private sector lender HDFC Bank were held by all top 10 mutual fund houses in July. Billionaire Mukesh-Ambani-owned Reliance Industries and India's second-largest private sector lender ICICI Bank were held by nine of the 10 AMCs.

Overall, eight AMCs—SBI AMC, HDFC AMC, ICICI Prudential AMC, Nippon AMC, UTI AMC, Aditya Birla Sunlife AMC, Kotak AMC and Mirae AMC—held all these four stocks.

These AMCs held more than Rs 2 lakh crore worth of shares in these four companies, including HDFC Bank (Rs 56,192 crore) and Reliance Industries (Rs 51,820 crore).

These four stocks have rallied smartly from their March lows, with Reliance Industries leading the charge (up 139 percent), Infosys (82 percent), HDFC Bank (34 percent) and ICICI Bank (27 percent).

Reliance (up 21 percent) and Infosys (up 31 percent) continued their run in July as well but ICICI Bank was down 1 percent and HDFC Bank 3 percent during the month.

Given the rally, eight of nine AMCs reduced their exposure to Reliance Industries in July. More than Rs 1.5 lakh crore of investment by global investors in Jio Platforms, a flourishing telecom business and its debt-free status pushed RIL stock price to record high in July. RIL became the first company to hit Rs 14-lakh crore (including its partly paid-up shares) market cap.

Infosys fired almost on all cylinders in the June quarter earnings, which gave confidence to investors and as a result, six of the 10 fund houses raised exposure to the stock in July. In the case of ICICI Bank and HDFC Bank, which reported good sets of earnings despite moratorium, five AMCs each increased their exposure.

"Market is being driven majorly by RIL. Also, technology stocks were favourites among AMCs. Growth anticipation and better Q1FY21 results led the rally. In my opinion, these stocks may continue to generate good returns in the long term. Amid uncertainty over earnings and sustained profitability, institutions have preferred heavyweights over broader indices," Gaurav Garg, Head of Research at CapitalVia Global Research told Moneycontrol.

The broader market has not performed well over the last three years. Since 2018 January, the Nifty has remained flat while the broader market as represented by midcap and smallcap indices have severely underperformed the Nifty.

Vineeta Sharma, Head of Research at Narnolia Financial Advisors agrees with Garg. "The market internals are highly skewed in the favour of selective largecap stocks and the same is being reflected when we see the mutual funds holdings," she said.

Till a broader economic recovery and earnings growth is seen in Indian companies, this situation will continue, she said.

Both experts favour holding these stocks for the long term.

Garg said investors should have 60 percent exposure in bluechips and rest in broader indices. "In my opinion, they should continue to hold them for mid to long term."

These stable good quality companies are a must-own for any investor for the long term, though once broader economy improves, it would be advisable to include growth-producing mid and small-cap stocks as well, Sharma said.

Apart from these four stocks, seven of 10 AMCs held Bharti Airtel in July and six have exposure to Axis Bank. Five fund houses also have exposure to Kotak Mahindra Bank, TCS and ITC.

HUL, SBI and NTPC were held by four out of 10 AMCs, while housing finance major HDFC is held by three fund houses.

Note: The data of top 10 AMCs and their exposure to stocks in July has been taken from ICICI Direct's research report of August 13, 2020.

 

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