MFs have been offloading these large-cap stocks. Have you sold any?

India’s stock markets, which had scaled new highs a few weeks ago, are now consolidating after a small correction even as investors look to park their money into large-cap companies in an attempt to seek some comfort.

While foreign portfolio investors (FPIs) or foreign institutional investors (FIIs) have been the driver of local bourses historically, domestic mutual funds have become very significant in the last few years given the rush of local liquidity. So much so that the current bull run is largely attributed to the flow of cash into domestic mutual funds, which have pumped in a massive amount of money into the stock market.

However, most local fund managers have been voicing concerns about the state of valuations of late. Quarterly shareholding data shows they pushed up their holding in over 200 listed companies but also cut their stake in a large number of companies during the quarter ended September 30.

In particular, local mutual funds cut their stake in 81 companies that have a valuation of $1 billion or more last quarter. In comparison, FIIs reduced their holding in 87 companies.

On the flip side, the mutual funds had hiked their stake in as many as 129 companies that command a valuation of $1 billion or more during the quarter.

Of the 81 companies where MFs reduced their stake, 48—or more than half—were large-cap companies.

Mutual fund managers were particularly bearish on FMCG companies, drugmakers, cement producers, oil and gas companies, selective private banks and engineering companies, among others.

Top large caps that saw MF selling

If we look at the pack of large caps with a market valuation of Rs 20,000 crore ($2.6 billion) or more, then MFs pulled down their stake in Reliance Industries, Hindustan Unilever, Kotak Mahindra Bank, Sun Pharmaceutical, Hindustan Zinc, Indian Oil, Grasim and Dabur India.

Among others, Shree Cements, ICICI Prudential Life, Indus Towers, Info Edge, Dr. Reddy's Labs, Tata Power, Cipla, Mphasis, Gland Pharma, IDBI Bank and Bharat Electronics also witnessed local fund managers turn bearish.

Further down the order, HPCL, ACC, Page Industries, ABB India, PI Industries, Biocon, Trent, Tata Communications, Aarti Industries, TVS Motor, Relaxo Footwears and Power Finance Corp saw MFs sell their stake last quarter.

Interestingly, as against offshore investors who cut their stake significantly in around 10 large caps, mutual fund managers only marginally snipped their holding.

The most significant cut in MF stake was just around 0.4% and that too in just four stocks—Grasim, Dabur, Info Edge and Aarti Industries.

If we look at those that saw MF dilute their holding by 0.3% or thereabouts, we get names like Sun Pharmaceutical, Shree Cements, Dr. Reddy's Labs, HPCL, Trent, Torrent Power, ICICI Securities, Cummins, Coromandel International, Oil India and Sun TV Network.