Mutual funds stock picks: Mutual funds bought into many declining stocks in July

NEW DELHI: Mutual funds purchased battered Nifty50 names in July, when the index consolidated in a narrow range before breaking out in August. The buy list included stocks such as Bajaj Auto, , Cipla, , and IndusInd Bank that fell up to 7 per cent for the month against Nifty’s 0.26 per cent rise.

Fund managers lapped up falling shares of Britannia Industries with both hands. Their holding in the biscuit maker rose 18.3 per cent in terms of the number of shares held but advanced only 10.9 per cent in value terms. The scrip was down 6 per cent for the month. It was the fifth-worst Nifty50 performer in the period.

MFs increased exposure to HDFC Life by 11.5 per cent in terms of shares and 7.9 per cent in value terms. This stock was down 3.24 per cent for the month. Adani Ports & SEZ, down 4 per cent in July, saw a rise in mutual funds’ exposure by 11.4 per cent in share terms and 6.7 per cent in value terms.

Two-wheeler makers Bajaj Auto and were also on the buy list. MFs exposure to Hero MotoCorp increased 10 per cent in share terms and 4.7 per cent in value terms. This stock was down 4.8 per cent for the month.

In Bajaj Auto, the third-worst Nifty50 performer, the fund houses raised exposure by 8 per cent in number terms . Value-wise, their exposure remained broadly flat over June. This stock was down 7.4 per cent in July.

Cipla (the seventh-worst performer in the period), M&M, Eicher Motors (ninth-worst) and IndusInd Bank were the other counters that saw buying by mutual funds on dips. Overall, the funds purchased 34 of the 50 stocks on Nifty50 in the month.

Sectoral churning
In the broader market, MFs cut their exposure to banks for the second straight month in July. Their holdings in & gas stocks hit a 48-month low; exposure to metals stocks hit a 33-quarter high and bets on cement increased after three straight months of fall.

After moderating for the last two months, metals’ weightage in MF portfolios hit a 33-month high of 3.4 per cent in July. Their exposure to the cement sector rose to 3.1 per cent after declining for three months. For the oil & gas sector, it fell 50 basis points to 6.4 per cent. On a YoY basis, it was down 340 basis points.

The sectoral churning was seen in a month that saw equity assets under management of the industry, including ELSS and index funds, rising 5.2 per cent month-on-month to Rs 12.1 lakh crore, thanks to the launch of several NFOs by mutual fund houses and a marginal rise in the key indices.