Mutual funds stock up on banks in December

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Mumbai: Mutual funds (MFs) stocked up on bank stocks in December in the large cap segment, as fund managers expecting long-term growth in Asia’s third largest economy continued to place bets on lenders.

Punjab National Bank was the most bought large cap stock by domestic fund managers, as the country’s second largest state-run lender raised Rs5,000 crore in a share sale to institutional investors. Asset managers bought Rs1,192 crore of the stock in December, data from Morningstar showed.

“Financials have always been in favour with fund houses and are their largest holdings, particularly top banks—HDFC Bank, ICICI Bank and State Bank of India,” said Kaustubh Belapurkar, director of fund research at Morningstar Investment Adviser India Pvt. Ltd.

“While recent GDP estimates have been pointing to a slowdown due to initial hiccups on reforms implementation, the long-term economic growth story is very promising,” added Belapurkar.

Earlier this month, India’s statistics office projected the economy to slow to 6.5% in 2017-18 from 7.1% a year ago. The economy has been hurt by the lingering impact of demonetisation and disruptions caused by GST.

However, World Bank’s Global Economic Prospects report released after this data said that after conceding its position as the fastest growing major economy to China for a year in 2017, India is likely to reclaim the position in 2018, with growth expected to accelerate to 7.3% in the year.

Fund managers also bought HDFC Bank Ltd shares worth Rs1,049 crore, and ICICI Bank Ltd shares worth Rs436 crore in the month.

That was the common view.

“There is a certainty that economy is on a recovery path. The high frequency data has been promising. Corporate lenders and infra firms have been high on fund managers’ radar,” said Gopal Agrawal, chief investment officer (equities) at Tata Asset Management Co Ltd.

Engineering and construction firm Larsen & Toubro Ltd was the second-most bought stock by mutual funds in December, as they purchased Rs1,083 crore of the stock in the month.

“Fresh NPA (non-performing assets) formation is coming down, and fund managers are liking banks, from medium term perspective,” Agrawal added.

Infosys was the most sold stock, after the country’s second-largest software exporter completed Rs13,000 crore share buyback in December. Fund managers offloaded Rs1,541 crore of the stock last month.

“Selling seen in Infosys is just because of the buyback. It is still the most-loved IT stock by fund mangers,” said Belapurkar.

Infosys was the only software company to feature in the top 10 holdings of mutual funds at the end of 2017, and was the fifth-most held stock, as mutual funds collectively held Rs20,494 crore of the stock in their schemes.livemint