See how they play market crash! MFs sold other stocks to lap up these 21 in October mayhem
Retail investors too continued to be upbeat with SIP flows in MFs surging 42% in October.
For instance, domestic mutual fund houses added some 7.67 crore shares of Coal India even as the stock declined over 7 per cent between August 29 and October 31. HDFC AMC, ICICI Prudential AMC, and Reliance Nippon AMC held 5.80 crore, 5.67 crore and 3.29 crore CIL shares, respectively, as of October 31.
The country’s largest miner recently posted an eight-fold jump in consolidated profit at Rs 3,085 crore for September quarter against Rs 370.4 crore reported for the year-ago quarter. Centrum has a ‘buy’ rating on the stock with a price target of Rs 370.
There are 21 other similar stocks where the fund houses bought 1-8 crore shares last month. Cash holdings of domestic mutual funds as a percentage of total asset under management slipped 112 basis points month-on-month to 6.12 per cent last month from a multi-year high of 7.33 per cent in September, shows a report by East India Securities.
This was the sharpest fall in mutual funds’ cash reserves in two years, the report said.
Among others, State Bank of India (SBI) is one stock in which fund houses bought some 7.21 crore shares. HDFC AMC, ICICI Prudential and Reliance Nippon were among the top shareholders among the fund houses in the lender. SBI shares plunged nearly 10 per cent between August 29 and October 31.
BSE Sensex tanked 11 per cent during August 29 and October 31.
Sharekhan says notwithstanding the fact that public sector banks added fewer non-performing assets (NPAs) sequentially, the rate of slippages is still much higher than normal. However, better-managed PSBs such as SBI and Bank of Baroda continue to show green shoots of improvement on the asset quality front as well as on other operating metrics.
Telecom major Bharti Airtel, private sector lender Axis Bank, oil marketing player BPCL, IT major Infosys and PSU lender Bank of Baroda are among other stocks where fund managers bought between 2.50 crore and 5.50 crore shares last month. These stocks have plunged up to 25 per cent in this period.
Oil marketing firms were under pressure in October following a spike in crude oil prices. The black gold surpassed over $86 a barrel early October only to slip sharply and hover around $60 a barrel mark this week.
Siddharth Khemka, Vice President and Head of Research (Retail) at Motilal Oswal Financial Services, said OMCs can be good bets on a long-term basis. “At these valuations, IndianOil looks attractive. It has a very decent cash flow and bulk of its capex is over. We also have a buy rating on BPCL and a ‘neutral’ rating on HPCL,” he told ETNow.
Besides IndianOil and HPCL, mutual funds kept lapping up crores of shares of beaten-down ICICI Bank, RIL, Vedanta, Tata Power, NTPC, Vodafone Idea, NHPC, Techno Electric and Engineering, Karur Vysya Bank, HDFC Bank and Adani Ports all through the market downturn.
Barring ICICI Bank (up 4.24 per cent), the other stocks declined up to 22 per cent in October.
HDFC Securities says it is bullish on Vodafone Idea. “Near-term outlook is tough, owing to severe Ebitda erosion (and high leverage), especially if the tariff war prolongs. We think tariff hikes are imminent.” The brokerage has a ‘buy’ rating on the stock with a target price of Rs 48. Vodafone Idea reported a consolidated loss of Rs 4,973 crore for the September quarter.
HDFC Bank, ICICI Bank and Axis Bank were among the outperformers in September quarter earnings. Sharekhan has ‘buy’ ratings on ICICI Bank, HDFC Bank and Axis Bank with a price targets of Rs 365, Rs 2470 and Rs 720, respectively.
Retail investors continued to be upbeat with SIP flows in mutual funds surging 42 per cent year on year to hit Rs 7,985 crore in October. Overall, net inflows to equity mutual funds increased to Rs 14,783 crore last month from Rs 11,251 crore in the previous month.
Kaustubh Belapurkar, Director, Fund Research, Morningstar Investment said the flows have been steady. “We had seen fund managers actually selling in September, because they wanted to create cash. They used that cash in the October correction. They pumped in almost Rs 26,000 crore into the equity market in October,” he told ETNow.