MFs say TA TA to TCS, other group stocks after Chandra elevated to head Tata Sons


NEW DELHI: Mutual funds cut stakes in three big Tata group firms, namely TCS, Tata Motors and Tata Power, in January after 30-year company veteran Natarajan Chandrasekaran was elevated to the post of Chairman of Tata Sons, the $100 billion business conglomerate.

Chandrasekaran, credited with creating Asia’s largest software maker TCS, took up the new assignment with effect from February 20.

While mutual funds exited the three counters, they were buying other Tata group stocks at the same time, following the ouster of former group head Cyrus Mystry.

Data available with Morningstar Investment Adviser India showed mutual funds sold 1,163,025 TCS shares during the month. Total shares held by MFs as of January 31 stood roughly at 1.95 crore, compared with 20.65 crore shares that they held in the previous month.

“Though the immediate reaction of the mutual funds to the developments in the Tata Group were negative, they started adding these stocks (except of Tata Power) in the subsequent months,” Morningstar Investment Adviser India Private said in a research note.

MFs had increased stake in TCS by 7.04 per cent in the December quarter despite the Tata-Mistry spat. But the trend reversed after Chandra’s elevation. In all, six MF schemes exited the stock, with 238 schemes holding it as of January 31, compared with 244 schemes holding the stock as of December 31, 2016.

“Chandra has been Tata’s man for a very long time. He is a home boy, who understands the evolutionary path. It is a first time in the history of the country that the conglomerate has chosen a professional to fill the chairman’s shoes or chairman’s chair and, therefore, he will need support and guidance of all above him, all below him and all his peers. One has to wait and see if that happens, and to what extent,” said Vallabh Bhanshali, Chairman at Enam Group.

On TCS, Bhanshali told ET NOW: “If TCS is the biggest company, most profitable company in the group, I must continue to provide oversight, because it has that weightage. Chandra has the advantage of knowing it well and challenges of all kinds in large businesses is a continuing process. So you keep your cool, hold your breath and manage and navigate. You do not always keep the same acceleration, so you decelerate and accelerate. I think the sector and the company are here to stay and make large profits.”

Data suggests mutual funds cut the numbers of shares they held in Tata Power by 15.39 per cent in January on a month-on-month basis. That happened after seven months of consecutive buying on the counter.

Mutual funds also cut their holdings on the Tata Motors counter by 2.65 per cent MoM. However, buying was seen in Tata Motors DVRs.

“In October and November, Tata Motors sales growth was impacted by demonetisation and mutual funds turned net sellers in the subsequent two months,” the Morningstar note said.

Tata Steel, on the other hand, saw buying of 16.26 lakh shares by mutual funds in January. This was 1.63 per cent higher than 9.99 crore shares that these institutional investors held as of December31.