The Hindu Business Line : Equity funds: The September action

With FIIs in the exit mode, domestic institutions such as mutual funds and insurance companies have remained key buyers of note in the stock market in recent months. September saw domestic funds net buy Rs 2,292 crore worth of equity, even as FIIs were net sellers to the tune of Rs 7,937 crore.

So, with many stocks plumbing new lows, which ones did the leading funds choose to accumulate during this period? We looked at the portfolios of the largest equity funds by asset size, in three key categories, to get at the stock-specific action in September.

Diversified equity funds: Of the top equity funds by size — HDFC Equity, Reliance Vision, HDFC Top 200, Reliance Equity and Magnum Contra (combined assets of Rs 13,000 crore), HDFC Top 200 and Magnum Contra made the most additions to their portfolio over this period.

Bharat Petroleum, Hindustan Unilever, HDFC, Infosys, Kotak Mahindra Bank and ICICI Bank were large-cap stocks bought by two or more of these funds in September.

Some of the unconventional picks made by these funds were Motilal Oswal (HDFC Equity), Tata Motors (HDFC Top 200), Cipla (Reliance Equity) and Reliance Petroleum (Reliance Equity). Among the mid-caps, some additions were Titan, Motherson Sumi (HDFC Equity), IVRCL (Magnum Contra), Cadila Healthcare (Reliance Vision) and IDFC (Magnum Contra).

The stocks in this period varied quite widely, with few commonalities across the five funds.

However, the sector preferences were broadly similar. Most of the funds reduced weights in engineering and construction stocks as well as metal stocks. On the other hand, most funds added to their exposure in banking, financials and refineries.

Mid-cap funds: Funds with a sizeable mid-cap exposure, such as Kotak Opportunities, IDFC Premier Equity and HSBC Midcap, did use the sharp setback in valuations of mid-cap stocks to indulge in some buying. But they displayed widely differing stock and sector preferences.

IVRCL, Welspun Gujarat and Balrampur Chini were among the stocks added to Kotak Opportunities’ portfolio, while IDFC Premier Equity added Coromandel Fertilisers, Bata, Exide, PTC and Motherson Sumi to its portfolio in September.

HSBC Midcap Fund also added sugar stocks Balrampur Chini and Shree Renuka Sugars, banks such as Union Bank, Bank of Baroda and Axis Bank and Onmobile Global and Bombay Rayon from other sectors.

Infrastructure funds: In the theme funds category, leading funds focussed on the infrastructure/power space have used the decline to selectively add to their holdings. However, cash positions in the portfolios remained quite high by end of September.

Reliance Diversified Power bought stocks such as Alstom Projects, Sterlite, REC and JP Associates, while BGR Energy, ONGC and Reliance Industries were pared.

Sundaram Capex Opportunities Fund used the September dips mainly to add to the mid- and small-cap exposures in its portfolio.

It added substantially to holdings in Great Offshore, Shiv Vani Oil, McNally Bharat Engineering, Praj and Alstom Projects, while substantially reducing exposure to Reliance Industries, Crompton Greaves and Aban Offshore.

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