Mutual Funds Consistently Increase Stake in 35 Companies in FY21
Mutual funds (MFs), which manage investments of their equity scheme investors, have been consistently buying in these 78 stocks in every quarter of the current financial year (FY).
MFs have net sold Rs 1.25 lakh crore of shares during the year, while the market has clocked 70 percent gains, hitting fresh record highs.
In the same period, foreign institutional investors (FIIs) have made a net buying of Rs 2.78 lakh crore worth of shares.
The shareholding data of every quarter in financial year 2020-2021 indicated that mutual funds bought heavily from these 78 stocks; of them the top 35 stocks have given a return of at least 100 percent since as long as April 1, 2020.
Gaurav Garg, Head of Research at CapitalVia Global Research told Moneycontrol: "It is evident that MFs selected the sectors that had offered the strongest returns in the past one year. In the second quarter of FY21, pharma, chemicals, and information technology sectors outperform during the lockdown. Following that, investors diverted their funds into the financial and auto sectors in the third quarter, which rallied in the last two months of the third quarter."
"As most of these stocks belong to the Mid and Small cap, the fund manager may have invested at discount prices as putting money in the Mid and Small caps comes with a higher risk-reward ratio. So, when the stocks are at discounted prices, the MFs may have taken the advantage of it," added Garg.
Experts believe that technology and pharma stocks could remain in the limelight for a longer period, given the current environment created by COVID-19 with respect to automation, digitalisation and healthcare, while the rally in steel stocks was attributed to rising commodity prices and expected recovery in demand.
Agriculture boosted fertiliser and the auto segment, while increasing government spending on infrastructure and the expected demand recovery, supported the auto business.
Garg’s prediction is that "If major economies put increased significance on renewable energy, technology and pharmaceuticals, these sectors will become more relevant to the MFs, " adding it to be a ``strong indicator that investment managers are switching away from cyclical industries in search of greater portfolio consistency and efficiency.”