Mutual funds outperformed foreign portfolio investors in 2014

Bhavana Acharya BL Research Bureau | Updated on January 24, 2018 Published on February 08, 2015

bl08_MFs table

Market cap of their stock picks grew 69% last year against 52% for FPIs

Mutual funds proved to be astute stock pickers in 2014. Their market wealth expanded far more than that of foreign portfolio investments (FPIs) last year.

The market capitalisation of stocks held by funds has shot up 69 per cent between December 2013 and now.

The holdings of foreign portfolio investors, on the other hand, were up a comparatively lower 52 per cent.

Mutual funds picked up stakes in far more multi-baggers and churned their holdings to a lesser extent than their foreign counterparts.

These trends are clear in a comparison of the shareholding patterns of the CNX 500 universe between December 2013 and December 2014.

Snapping up mid-caps

About 67 per cent of the stocks in which funds increased their shareholding beat the broad-market gauge CNX 500’s 46 per cent return between January 2014 and now.

FPIs put up a relatively poorer show, with 59 per cent of stocks in which they upped holdings beating the broader market.

MFs scored by buying heavily in mid- and small-cap stocks. The stocks in which MFs increased their holding by a hefty margin (5 percentage points or more) between end-December 2013 and December 2014 were almost entirely in this space. IDFC was the lone blue-chip where MFs raised their stake by a significant margin.

In contrast, FPIs seem to have preferred large-caps. Nearly a fifth of stocks where FPIs hiked holding were large-caps such as Zee Entertainment, Dr Reddy’s Labs, Reliance Communications and Hero MotoCorp, which underperformed the market.

The decision to buy small and mid-size stocks also helped MFs snap up more multi-baggers than FPIs.

Four out of every 10 stocks where MFs raised their stake returned over 100 per cent between January 2014 and now. In contrast, just about three in every 10 stocks where FIIs added to their holdings turned out to be multi-baggers.

In MBL Infrastructures, for instance, fund holding more than doubled from 10.9 per cent in December 2013 to 24.8 per cent by end-December 2014. FPIs, in contrast, held less than 2 per cent in the stock. MBL Infrastructures is among the biggest gainers having more than quadrupled in the past year.

A similar story plays out in HSIL, where FPIs pruned their holding by 9 percentage points while MFs hiked their stake by 11.6 percentage points between December 2013 and 2014. The stock is up 281 per cent. Other similar examples include Bharat Electronics, NCC, Whirlpool India, and Automotive Axles.

Divergent moves

FIIs and MFs also made divergent sector moves. While several capital goods stocks such as Techno Electric, Crompton Greaves and Greaves Cotton sparked MF interest, FPIs did not add to their holdings in the sector.

Instead, they chose to increase stakes in realty and oil & gas stocks such as Kolte Patil Developers, Prestige Estates, and BPCL.

Apart from snapping up stocks that turned out to be chart-toppers, MFs also refrained from making drastic cuts in their holdings, gaining as the market took wing.

They cut holdings by a significant margin of 5 percentage points or more only in 8 stocks between December 2013 and 2014.

FPIs, though, pruned holdings by significantly in 34 stocks and lost out as these surged.

For example, in stocks such as ICRA, FAG Bearings, and Strides Arcolab, all of which more than doubled, FII holdings were lower by 9-12 percentage points by end-December 2014 over 2013.

Published on February 08, 2015
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