NEW DELHI: Mutual funds were seen churning their portfolios in information technology, consumption and private banking sectors during the month gone by, even as they were busy buying into a couple of metals and m ining names ahead of the Interim Budget 2019.
The domestic institutional investors offloaded shares of Wipro and HCL Technologies but accumulated those of Infosys. In the banking space, they dumped shares of private lenders IndusInd Bank and YES Bank to accumulate shares of ICICI Bank, Axis Bank and HDFC Bank. They also showed preference for consumer stocks such as ITC, HUL and Asian Paints over discretionary plays such as Maruti Suzuki. Farm play M&M, too, was on the radar of these funds.
In addition, fund managers showed preference for oil marketing major IOC over BPCL. Besides, they also dumped several NBFCs and telecom stocks, data suggested.
January was the third straight month when inflows into equity funds slowed down. In fact, inflows shrank 60 per cent to Rs 6,158 crore in January over the same month last year. Lack of returns in last one month and cautiousness ahead of the general elections were seen as major reasons for the slowdown in inflows.
“Churning was evident across sectors. Akin to the trend of last few months, select private banks were in demand followed by IT and consumption names. Fund houses also reduced exposure to select auto and cement names,” Edelweiss Securities said, adding that the market has entered a wait and watch period ahead of the all-important general elections.
Select private banks saw MF buying
Data suggests ICICI Bank was the biggest buy, with funds buying 4.41 crore shares of the private lender during the month. On a net basis, their exposure to the counter increased by Rs 1,606 crore during the month. HDFC Bank and Axis Bank saw mutual funds buy additional shares worth Rs 1,402 crore and Rs 1,127 crore, respectively.
In his Budget speech, Finance Minister Piyush Goyal adhered to the path of fiscal prudence by projecting a marginal 10 basis points slippage in FY19 fiscal deficit to 3.4 per cent of GDP, compared with the market expectations of 3.5 per cent. The government had initially targeted a fiscal deficit at 3.3 per cent for FY19.
Post last week’s money policy review, RBI Governor Shaktikanta Das said if one were to go to the second decimal point, fiscal deficit would be 3.37 per cent for FY19 and 3.35 per cent for FY20, which is broadly in alignment with the path of fiscal consolidation.
This less-than-expected slippage and the recent drop in inflation persuaded RBI to cut policy rate by 25 basis points last week. Among stocks seeing brisk buying among mutual funds, ICICI Bank and Axis Bank were the top two preferred picks of CLSA.
“The recent earnings from ICICI Bank and Axis Bank give us more confidence that the NPL cycle has indeed peaked out for these two,” CLSA said in a note. IndusInd Bank and YES Bank saw selling by mutual funds.
Tractor maker saw buying, car makers losers
The Interim Budget 2019 was special as it was the last Budget for the ruling NPA ahead of May general elections. It was expected to appease farmers and the middle class, and it did.
Ahead of the main event, MFs were seen buying shares of tractor maker M&M to the tune of Rs 171 crore. But they sold shares of Maruti Suzuki worth Rs 218 crore in January. CLSA has cut its weightages on both stocks.
Maruti Suzuki, like other car makers, is seeing a slowdown in auto sales growth. The largest carmaker saw its December quarter profit drop 17.21 per cent to Rs 1,489 crore.
NBFC, telecom on sell radar; metals saw buying
Bajaj Finance, Muthoot Finance, Indiabulls Housing Finance were a few NBFCs that saw selling by MFs during the month.
Ambit Capital in a recent note said credit growth for NBFCs would decelerate to 12 per cent in FY18-21E from 18 per cent CAGR in FY14-18, with borrowing cost rising by 35-40 basis points. It, however, noted that auto and consumer financiers are better placed than housing finance companies (HFCs) and wholesale lenders.
Metals & mining stocks Hindalco, Coal India and JSW Steel saw buying interest, but selling was seen in telecom stocks Bharti Airtel and Vodafone India.
Funds dump Wipro, HCL for Infosys
MFs bought 11.65 crore shares of Infosys in January, increasing their exposure to the IT major by Rs 1,238 crore. CLSA has increased its weight for the stock in its model portfolio. Domestic funds’ exposure to Wipro fell by Rs 383 crore, and in HCL Tech by Rs 220 crore.