India’s top money manager just dumped a number of blue chips to bet on midcaps
The fund house added more shares in as many as 61 companies.
The money manager more than doubled its holding in select aviation, NBFC, cement and consumer durables plays in April, even as it sold stake in industry leaders Maruti Suzuki, Reliance Industries, Infosys, Asian Paints and ICICI Bank.
The fund house added more shares in as many as 61 companies, while reduced its holdings in as many as 84. NSE’s Nifty index rose nearly 8 per cent during the January-April period, while Nifty Midcap100 and Nifty Smallcap100 shed up to 2 per cent each.
Brokerage Elara Capital says midcaps continue their underperformance against largecaps. “Relative valuations are plunging towards -1 standard deviation levels, making midcaps very attractive. A negative SD shows the price to equity ratio has slipped to the lower end of average valuations.
Stocks where the top fund manager raised its holding in April included in InterGlobe Aviation, where its holding has gone up to a whooping 1,94,200 shares as of April 30 from 15,600 on March 31. Likewise, it increased stake in Indiabulls Housing Finance (from 99,238 shares to 3,72,605), ACC (from 8,000 to 27,200) and Bajaj Electricals (from 8,65,300 to 24,60,000).
According to Stewart & Mackertich, improved pricing power, lower ATF coupled with rupee appreciation should aid an improvement in profitability of domestic airlines. With the global ban on Boeing 737 Max 8 planes coming into force from March, capacity is not likely to rise at the expected pace, thus demand should outpace supply in the near future. This means the prospects for yields would be encouraging, the brokerage said.
“We expect IndiGo to outperform, as it has a deep domestic network with over 43 per cent market share, availability of slots, lowest cost structure and a healthy cash balance to fuel the airline,” the brokerage said.
ACC has been demonstrating sustained ability to improve sales volume since Q1CY17, which had remained stagnant through CY11-CY16. While its CY18 volume growth stood at 8.7 per cent YoY, capacity utilisation came in 85 per cent, Ashika Stock Broking said in a report.
“We expect ACC to deliver improved RoE backed by better pricing and lower operating expenditure,” the brokerage said.
HDFC AMC also developed fancy for select power plays. Data shows the fund house bought over 1 crore additional shares in NTPC and BHEL during the month. It held 35.75 crore shares of NTPC and 2.04 crore shares of BHEL as of April 30, 2019.
Antique Stock Broking prefers utilities firm like NTPC over equipment makers like BHEL. “In the short run, for a year or two, demand in power equipment and projects is unlikely to grow. Policy makers are consolidating and streamlining the existing 68GW of projects under construction. Plus, in the near term, the focus is on making good of the 175GW renewable target. This is visible in subdued order pipeline for BHEL, a state-owned power-equipment manufacturer. However, with commissioning pace of thermal plants are inching up,” it said
Tiles firm Kajaria Ceramics, telecom major Bharti Airtel as well as private sector bank Karur Vysya Bank also drew interest of HDFC AMC, which added 13,000 shares of Kajaria, 43.65 lakh shares of Karur and 16.77 lakh shares of Airtel during the month.
Coal India, Bank of Baroda, Apollo Tyres, GAIL India, Sadbhav Engineering, Bharat Electronics, Tata Steel, Bharat Dynamics, Jagran Prakashan, Chambal Fertiliser, Power Finance Corporation, Firstsource Solution, REC, Redington, REC, Kalpataru Power, KEC International, Axis Bank, Indian Hotel, BPCL, Gabriel India, SBI, Cipla, ITC, ICICI Prudential, Zee Entertainment and HDFC were among other stocks where the fund house raised its stake during the month.
On the other hand, it offloaded more than 13 lakh shares in Infosys, ICICI Bank and Reliance Industries. It also sold over 50,000 shares in Maruti Suzuki, Adani Enterprises, HPCL, Britannia, Kotak Mahindra Bank, Allahabad Bank, Wipro and NBCC, among others.
Brokerage firm YES Securities recently gave a ‘sell’ rating to Maruti Suzuki with a price target of Rs 5,850. “Maruti Suzuki (MSIL) reported a weak performance in Q4FY19 with Ebidta coming in 8 per cent below expectations,” said YES Securities.
In the Nifty50 pack, shares of companies like Reliance Industries, Tata Motors, Axis Bank, Wipro and HCL Technologies surged over 20 per cent in the first four months of 2019, while Hero Moto, Indiabulls Housing Finance, Vedanta, Mahindra & Mahindra, Eicher Motors and Maruti Suzuki declined over 10 per cent.
Average asset under management (AUM) of HDFC AMC stood at Rs 3.43 lakh crore as of March 31, 2019. It was followed by ICICI Prudential AMC (Rs 3.21 lakh crore) and SBI Fund Management (Rs 2.84 lakh crore) in terms of AUM.