Equity MFs log out of IT stocks

Chennai: With growth outlook turning gloomy, fund houses have reduced their exposure to the IT (information technology) sector substantially in 2016-17. In fact, IT saw the biggest fall in MF holdings percentage terms — from 11.9% to 9.2% — among sectors during the year.

Fund houses sold TCS shares to the tune of Rs 422 crore during the fiscal. “Exposure to technology sector dipped significantly. While (fund) managers didn’t sell large positions, there weren’t any major additions either,” said Kaustubh Belapurkar, director manager, research, Morningstar Investment Adviser India. “Thus on an overall basis the technology exposure came down significantly,” he said. TCS was among the counters that witnessed selling.

Shares of financial services companies continued to remain top picks of fund houses in 2016-17. The exposure of MFs to financial services sector increased to 27.9% at the end of March this year from 25.5% in March last year. HDFC Bank remains a favourite for fund managers with the market value of MF holdings in the stock touching Rs 28,722 crore, the highest for an individual scrip. HDFC Bank alone accounts for nearly 5% of the MF industry’s total equity holdings in value terms. ICICI Bank is the second most favoured stock with the value of MF holdings in the scrip standing at Rs 22,819 crore, data compiled by Morningstar Investment Adviser India, an investment research firm showed.

The top three banks in the country by assets — SBI, ICICI Bank and HDFC Bank —constituted 12.23% of overall equity MFs total holdings in value terms. Fund managers increased the exposure to financial services sector substantially. Many private sector banks, NBFCs (non-banking finance companies) and select public sector banks witnessed fresh purchases.

Stocks like ICICI Bank and SBI saw significant additions in the year. The Axis Bank scrip, however, witnessed consistent selling, especially in the second half of the year. Sensex heavyweight ITC was the most bought large cap stock in value terms during 2016-17. This was due to a combination of EPFO (Employees’ Provident Fund Organisation) flows into the Nifty ETF as well as buying by fund managers.

While Indian Oil and GAIL (India) were among the top additions in the large-cap space, Engineers India and Shriram City Union Finance were among the top picks in the small/mid-cap segment.

IPOs (initial public offers) such as that of Equitas also witnessed fair bit of interest and was among the top buys in the small/mid cap segment. Basic materials, consumer defensives and utilities were among the sectors that witnessed increase in allocations while industrials and pharmaceuticals sectors saw a reduction.

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