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If you are wondering what fund managers are doing with their large-cap holdings, yours is not an isolated case. Like you, a lot of others, having seen how large-caps have suffered in the recent rout, are worried about the situation that funds are suddenly facing. We did a straw poll, checking it out with fund houses, trying to sense their strategies with respect of what is obviously a very critical segment of the market.

Most people we have talked to have tried to tone down the downbeat feeling about these stocks. The latter, we are told, are likely to stage a comeback when the trend reverses. In fact, most investment specialists believe that these may well be among the first to turn around. However, they concede that all this may take some time to materialise.

Large-caps – mind you, the top-end of the mid-cap segment have become very weighty indeed in recent days – are by far the most popular stocks. Institutional money chases them in very copious quantities, a state of affairs that is reflected well in their trading volumes. Analysts closely follow the ultra-large counters, their findings often resulting in headlines carried by the financial press.

The kind of activity that large-cap counters have lately attracted is mirrored in a review worked out recently by ICICI Bank. The latter, thanks to a ‘Fund Managers Revealed Stock Preference Index’, has underscored certain interesting findings concerning the large-cap domain. Here, we have selected a few key pointers pertaining to the quarter ending June 2007.

* Reliance Industries is the most preferred company for fund managers selected for the review. It makes up 4.7 per cent of the funds’ total corpus.

* TCS and Satyam attracted huge accumulations even as these counters witnessed price erosions, resulting in value buying. Ditto for M&M.

* There are six new entrants to the Top 30 list are: Sun Pharma, Bharat Electronics, Wipro, AB Nuvo, Amtek Auto and Thermax.

* Bearish outlook on construction materials led to Grasim being positioned as the 15th most preferred stock for the quarter as compared to being the 5th for the December 2006 quarter. ITC dropped from the 4th to the 10th slot.

* Fund managers were bullish on telecom majors Bharti and RCOM. Taken together, they accounted for 5.2 per cent of the funds chosen for the review.

* ONGC, Tata Motors and JSW Steel saw large-scale volume declines as fund managers trimmed exposure to interest-sensitive segments of the economy.

The top few counters in the most preferred list are Reliance, Infosys, Bharti, TCS and L&T. Remember, we are talking only about the June quarter at this juncture. The order of preference may witness a telling change by the last week of September. That is not the point, of course. What we are suggesting is that the universe of large-caps is marked by hectic activity. There is perhaps no need to fret about their future, the latest decline in valuations notwithstanding.

Fund circles point out that the current state of affairs concerning large-caps may prompt some investors to take a closer look at index products, that is, funds that mirror the Sensex or the Nifty. What else can promise you a relatively cheaper way of acquiring a pool of ultra-large stocks? We will talk about the latest developments concerning index funds in another column.

Feedback may be sent to nilanjan@thehindu.co.in

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