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Stock Analysis, IPO, Mutual Funds, Bonds & More

20 stocks where mutual funds raised stakes in Sept quarter

ICICI Lombard General Insurance was one of the companies that drew lot of interest of fund houses.

, ETMarkets.com|
Oct 15, 2019, 11.03 AM IST
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SBI Life Insurance saw mutual fund holding rise to 5.80 per cent from 4.91 per cent.
At a time when overseas investors are not showing much confidence on Indian equities, domestic institutional investors (DIIs) have been lapping up stocks selectively in spite of the ongoing slowdown in the economy.

Data shows DIIs bought shares worth Rs 53,820 crore during the second quarter of FY20, when foreign institutional investors offloaded equities worth Rs 22,460 crore. Amfi data shows investment flow through SIPs remained above Rs 8,200 crore a month through the July-September period.

Fund houses bought shares across sectors including insurance, housing finance, shipbuilding, IT, private banks, power, media and retail, data available with Ace Equity showed.

ICICI Lombard General Insurance was one of the companies that drew lot of interest of fund houses. Available data shows fund houses increased stakes in the general insurer by 4 percentage point to 8.37 per cent by the end of Q2FY20 from 4.23 per cent at the end of Q1.

SBI Life Insurance saw mutual fund holding rise to 5.80 per cent from 4.91 per cent. The stock is up nearly 40 per cent on a year-to-date basis (YTD) till October 11.

“The new Motor Vehicles Act could theoretically add Rs 9,800 crore of third-party (TP) premiums for the industry and Rs 2,600 crore for ICICI Lombard, provided there is 100 per cent compliance,” HSBC Global Research estimated in a report.

“Also, the Act is likely to result in lower loss ratios and greater reserving certainty, but lower investment float. With a high TP claims ratio of 90.8 per cent in FY19, ICICI Lombard looks set to benefit. The risk, however, is that, with rising levels of insurance, the annual regulator-set price hikes may decline going forward,” it said.

The global financial services firm has a ‘reduce’ rating on ICICI Lombard with a price target of Rs 940. “We believe the shares are overvalued,” it said.

Axis Securities is bullish on SBI Life with a price target of Rs 936. “SBI Life is a play on the under-penetrated life insurance market, with a strong distribution foot print of its parent SBI. Given the untapped distribution reach, along with tailwinds from financialisation of savings, improving protection share, lowest operating cost ratios, and improving margins, we expect SBI Life to deliver steady performance,” the brokerage said.

Among others, LIC Housing Finance, Garden Reach Shipbuilders, eClerx, Coffee Day Enterprises, Axis Bank, V-Mart Retail, TV Today Network and TVS Motor saw mutual funds increase holdings by at least 2 percentage point during the quarter gone by.

Indiabulls Ventures is bullish on Axis Bank with a 12-month price target of Rs 800. On a year-to-date (YTD) basis, the stock is up 7.20 per cent to Rs 672.50 on October 11 from Rs 627.50 on January 1.

With a 81 per cent rally YTD, Garden Reach Shipbuilders emerged as top gainer on the list. On the other hand, shares of eClerx and Coffee Day Enterprises have declined more than 60 per cent during this period.

Coal India, Birlasoft, Sonata Software, Unichem Laboratories, Mold-Tek Packaging, Housing Development Finance Corporation, Capacite Infraprojects, Cera Sanitaryware, Indian Oil Corporation and SJVN were other top favourites of mutual fund houses during the quarter.

IIFL Institutional Equities is positive on Coal India with a price target of Rs 270. The brokerage said CIL’s production and offtake in April-Sept FY20 declined 6 per cent and 5.2 per cent YoY, respectively, as heavy rains and multiple work disruptions impacted Q2 production and offtake declined 13 per cent and 11 per cent, respectively.

“We expect a gradual recovery in volumes during the second half of FY20 driven by inventory re-stocking cycle and a seasonal uptick in power demand. CIL is attractively valued but the overhang of stake sale remains,” IIFL said.

Meanwhile, many fund houses dumped shares of select chemical, amusement park and pharma players and public sector banks during the quarter. For instance, they reduced holdings in Ujjivan Financial Services to 3.90 per cent from 8.40 per cent and cut stakes in Mindtree, Wonderla Holidays, Adlabs Entertainment and Intellect Design Arena by over 2 percentage point each.

Other stocks that saw offloading of shares by fund houses included Clariant Chemicals, Amara Raja Batteries, Canara Bank, Neuland Laboratories, Tata Power, The Karnataka Bank, PNB Housing Finance and Premier Explosives. MF holdings in each of these stocks fell by over 1 percentage point during the quarter.

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