HDFC Bank, Infy, Zee among large cap picks of mutual fund managers

Indian stock indices are consolidating just around 5% below their all-time highs after seeing a deep correction three months ago followed by a pullback action from the bulls over the last one month.

While foreign portfolio investors (FPIs), or foreign institutional investors (FIIs), have been the driver of local bourses historically, mutual funds (MFs) have also become significant in the last few years given the rush of local liquidity. So much so that the bull run of 2020 and 2021 is largely attributed to the flow of cash into the domestic mutual funds, who have in turn pumped in money into the stock market.

Quarterly shareholding data shows local fund managers pushed up their holding in hundreds of listed companies.

In particular, MFs hiked stake in as many as 112 companies that have a valuation of $1 billion or more last quarter, compared with 118 companies in the quarter ended March 31 and 108 companies in the three months ended December 31, 2021.

Of these, 79 were large-cap companies, almost the same number as the previous quarter. But much more than the 58 large caps where MFs pushed up their holding in the three months ended December 31 and 74 such companies in the quarter ended September 30, 2021.

Mutual fund managers were bullish on top private sector banks, large software service companies, automobile makers besides selective cement, FMCG, pharma, engineering and financial services counters, among others.

Top large caps that saw MF buying

If we look at the pack of large caps with market valuation of Rs 20,000 crore ($2.6 billion) or more, then MFs pushed up their stake in Reliance Industries, HDFC Bank, Infosys, HDFC, Bharti Airtel, Asian Paints, Maruti Suzuki, HCL Technologies, Larsen & Toubro and Bajaj Finserv.

Among others, Axis Bank, Titan, UltraTech Cement, ONGC, JSW Steel, Mahindra & Mahindra, Tata Motors, Grasim Industries, Tech Mahindra and Dabur India, also saw domestic mutual funds pick up additional shares.

Several of these companies were also among the MF picks in the previous quarter. These include HDFC Bank, Infosys, HDFC, HCL Tech, L&T, Maruti Suzuki, UltraTech Cement, M&M, Tech Mahindra.

Indeed, some have now MFs buy more shares for three straight quarters running: HDFC Bank, Infosys, HCL Tech, L&T, UltraTech Cement and M&M.

Meanwhile, in 14 large caps mutual funds picked up 2% or more additional stake last quarter. This pack includes Motherson Sumi, Zee Entertainment, Escorts Kubota, Gland Pharma, SBI Cards, Bata India, Hindalco, Bandhan Bank, Sundaram Finance, TVS Motor Company, Navin Fluorine, Tech Mahindra, Emami and ICICI Lombard.

Zee Entertainment and Bandhan Bank were also companies where MFs had hiked stake by 2% or more in the previous quarter. This shows they are very bullish on these counters.