December buy-sell data for the fund house showed it sold 1.65 crore shares of Bandhan Bank and dumped 20-85 lakh shares of Vedanta, Tata Steel, Cholamandalam Investment & Finance, DLF, BPCL, Kotak Mahindra Bank and Bank of Baroda.
Most of these stocks saw a surge in the past months. Analysts at the fund house believe the market has run up quite a bit and any more uptick will require solid financial performance from India Inc.
“Equities are now expensive on conventional valuation metrics and continue to be driven by the narrative on equity risk premium, which compares the current low earnings yield to even lower bond yields. While these narratives can help frontload equity returns, it would require a substantial uptick in corporate earnings for the rise to sustain,” fund managers at SBI MF said in a note.
Equity investors withdrew nearly Rs 23,000 crore from mutual funds during the month, which forced many of these money managers to sell their holdings. The selling accompanied massive buying by overseas portfolio investors on Dalal Street.
SBI MF said given the still elevated uncertainties and high market polarisation, going bottom-up can be more rewarding than staying focused on aggregates.
SBI MF saw a change at the top of its investment team last month, as Chief Investment Officer (CIO) Navneet Munot resigned after a 12-year stint. R Srinivasan, Head of Equities, and Rajeev Radhakrishnan, Head of Fixed Income, have taken over as joint CIOs.
The fund house betted heavily in some of the recent market debutants –Burger King India, Mrs Bectors Foods and Antony Waste Handling. It also bought 1.36 crore shares in Hindalco and 1.02 crore shares in M&M Financials.
Besides, fund managers bought 25-85 lakh shares of ITC, Indian Oil, Punjab National Bank, Infosys, SBI, NMDC, ICICI Bank, Sun Pharma, Axis Bank, Zee Entertainment and ONGC.
Many of these are PSUs. Government-owned companies have found favours with domestic money managers in recent weeks as analysts believe these stocks could be up for a re-rating. Moreover, the government is also pressuring the PSUs to reward shareholders in order to fill in its own coffers to help mitigate the widening fiscal gap.
“A lot of PSU stocks could emerge interesting now, especially the metals pack, and SBI should see an improvement in valuation,” said Abhimanyu Sofat, VP-Research, IIFL Securities. He is also bullish on BPCL.
Some of SBI Mutual Fund’s buying and selling during the month could be due to changes in the composition of benchmarks that the passive funds track.
The fund house also bought fresh positions in Automotive Axles, Canara Bank, Cholamandalam Financial Holdings, CRISIL, Escorts, Max Financials and Tata Chemicals. At the same time, it exited Aavas Financiers, CDSL, eClerx Services, ICICI Securities, Indiabulls Housing, NIIT and Sundaram Finance Holdings.
Meanwhile, the fund house further strengthened its lead over its peers in terms of asset under management (AUM). It now manages Rs 4.57 lakh crore, up by Rs 18,000 crore in a month, some of which could be marked-to-market gains. HDFC AMC with Rs 3.90 lakh crore AUM and ICICI Prudential AMC with Rs 3.89 lakh crore follow it closely in that order.
