Mutual funds have dumped automobile stocks, bringing down their holding by 17 per cent to ₹60,426 crore in January against ₹72,924 crore logged in December. Their holding of construction sector stocks was also down at ₹45,812 crore (₹48,830 crore) due to a slowdown in fresh investments and concern over the financial performance of the players.

With uncertainty looming large, the mutual fund industry has also dumped shares of metals (₹2,626 crore), cement (₹2,215 crore) and industrial manufacturing (₹2,821 crore) companies. The funds have also turned negative towards the energy sector with its AUM dipping to ₹1.09 lakh crore (₹1.11 lakh crore) in January.

Interestingly, IT stocks seem to be back in favour. The funds bought stock worth ₹8,000 crore, taking their overall holding to ₹90,694 crore (₹ 82,372 crore) in January. They were also bullish on financial services and acquired stocks worth ₹2,266 crore, pushing up their holding to ₹3.07 lakh crore (₹3.05 lakh crore).

While the inflow into equity funds has been slowing down over the last three months, the companies are also facing redemption pressure and have to take a calculated risk, said an analyst.

The BSE Auto Index slid 2,232 points in January to 18,495 from 20,726 on January 1, while the BSE Metal Index was down 793 points to 10,959 from 11,752. The auto index has continued its downtrend in February, falling by five per cent or 874 points to 18,111 from 18,985.

Vinay Paharia, Chief Investment Officer, Union Mutual Fund, said the profit growth in the automobile sector is expected to remain under pressure this quarter going by the recent numbers announced by the industry.

However, he added that the that fund house has taken a contrarian view and has started buying into the sector after the recent fall in share prices.

“Though the construction sector is also under pressure right now, we believe the sector is the backbone of the country’s economic growth and will revive once economic activities start picking up,” he added.

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