In October, the fund house lowered its holding in at least 40 Nifty companies, as their valuations turned expensive amid the ongoing stocks rally from the March lows. In turn, they raised stakes in several midcap and smallcap stocks from across sectors.
The 50-share Nifty gained 55 per cent to 11,642 till October 30 from its 52-week low of 7,511 hit on March 24. The index closed at 12,938 on Wednesday, November 18.
The rally has taken Nifty’s price to earnings (P/E) ratio to 34.94 times as of November 17 from a 10-year average of 22.55 times.
Data available with ACE Mutual Fund showed SBI Mutual Fund cut its exposure to the blue chip stocks, such as Bharat Heavy Electricals, IndianOil, ITC, ICICI Bank, SBI, HDFC Bank, Infosys, Adani Ports, Axis Bank, ONGC, NTPC, L&T, Hindalco and RIL, among others, last month. It sold over 28 lakh shares in these companies last month.
On the other hand, the fund house raised its holdings in midcaps and smallcaps such as NHPC, City Union Bank, SJVN, Kalpataru Power, Engineers India, GE T&D India, ABB, DLF, Star Cement, Avenue Supermarts, Phoenix Mills, Narayana Hrudayalaya, CAMS and CSB Bank. It added over 2.80 lakh shares of these companies during the month.
“A fiscal booster is a must to kickstart the long overdue economic and earnings cycle in India. A decisive reflationary shift in global policy can be an added tailwind. Real estate, which has an important bearing on the economy owing to the high multiplier impact, is showing early signs of recovery, which is encouraging,” Navneet Munot, CIO, SBI Funds Management, said in a note on November 2.
“We are excited about equities, as we believe the next earnings upcycle may be very close, notwithstanding the near-term risks,” he said.
Sectorwise, the fund house lapped up to 2.50 lakh shares of Aurobindo Pharma, Divi’s Labs, Lupin and Cipla from the pharma space. On the other hand, it lapped up over 22,000 shares of Dabur and Marico from the FMCG sector.
“With growth becoming more broadbased, this polarisation should reverse. Looked through other lenses, this would mean a reversal in polarisation in value versus growth, smallcaps versus largecaps, cyclicals versus defensives, and more importantly emerging markets versus developed markets. For India, a global reflation could just be the icing on the cake,” Munot wrote.
The fund house also bought 5,000 to 20,000 additional shares in Adani Green, Adani Transmission, Berger Paints, ICICI Lombard, Pidilite, HDFC AMC, Punjab National Bank, V-Mart Retail, Hindustan Zinc, Havells India, General Insurance Corporation of India, Oracle Financial Services, Godrej Consumer Products and IGL, among others, in October.
Its fresh buys during the month included Apollo Tyres, Coforge, Firstsource Solutions, Matrimony, Mazagon, Mphasis, while it completely exited Equitas Holdings and Oil India.
Overall, the fund house raised exposure to at least 84 stocks last month, but went light on 95 others. Some of this buying or selling may have been done for SBI MF’s passively-managed index funds.
Global brokerage Morgan Stanley also believes smallcaps and midcaps would beat their largecap counterparts in 2021. “The concentration of market-cap and profits may have peaked with the return of the growth cycle. Portfolio returns are more likely to be driven by bottom-up stock picking rather than top-down macro forces. So, keep sector positions narrow,” the global brokerage said.
