What top mutual funds bought and sold in the month of May 2023

Today, Indian mutual funds have become a formidable force in equity markets. It is not just about the ₹43.20 trillion of AUM that the mutual funds are having under their belt. This is the total AUM, but even assuming that equity AUM is around 50%, that is a lot of money. Also, the SIPs bring in more than ₹14,000 crore into mutual funds each month and most of that money is directed at equity funds only. NFOs may have been tepid in May but is sure to pick up steam soon. Of course, in recent months, the flows have been all about debt but for now our focus will be on equity funds only. Let us take a macro picture on the equity fund churn in the month of May 2023.

Forget about SIP flows, the story is in the churn

One of the complaints we hear is that the net inflow into active equity funds was just about ₹3,240 crore in May 2023. That is missing the wood for the trees. The net inflow or outflow does not determine the churn, but it is the gross flows that determine the churn by the mutual funds in the equity markets. Let us understand that better. Let us understand the gross flow numbers in May 2023 behind the net inflow of ₹3,240 crore into equity funds. The gross inflows were ₹30,809 crore into equity funds while the gross outflows from equity funds was to the tune of ₹27,569 crore. That is what determines the churn and that is what will be our focus.

By now, we know that equity funds would have substantially and aggressively churned their equity portfolios in May 2023. So, the next logical question is what stocks did they buy and what stocks did they sell? To get a more granular picture of mutual fund portfolio churn, we will steal a glance across the top 5 funds with the highest equity AUM. They jointly account for more than 80% of the overall equity AUM of mutual funds in India so they are more than representative of the true picture. Here are how the top 5 funds in India churned their equities.

SBI Mutual Fund: adds HDFC Ltd, lightens on Kotak Bank

Here is a quick look at what SBI Mutual Fund bought in the month of May 2023. When it comes to large caps, the percentage change in a month is the best gauge. For the second month in a row, SBI MF added to its positions in HDFC Ltd. The fund added smaller quantities of ICICI Bank, Infosys, Bharti Airtel, and L&T in the month. The fund stayed neutral on HDFC Bank, Reliance Industries, ITC Ltd and SBI.

However, SBI MF sharply cut its stake in Kotak Mahindra Bank; which could be in the aftermath of the MSCI story. However, SBI Mutual Fund was not just buying in large caps but also in mid-caps. Some of the mid-caps that it accumulated in the month of May 2023 include Mankind Pharma, Gland Pharma, Zee, and Voltas.

ICICI Prudential MF goes long on L&T, Sun, but sells HDFC Bank, Maruti

The fund has typically been an aggressive player and as the second largest fund AUM in the industry, it does set the tone for investors. In the month of May 2023, ICICI Prudential Mutual Fund made substantial additions to its holdings in Larsen & Toubro and Sun Pharma and smaller quantities of Infosys and ICICI Bank. However, it stayed neutral on NTPC.

As part of the churn, ICICI Prudential Mutual Fund was actively cutting positions in a number of counters. They aggressively cut holdings in HFDC Bank and Maruti Suzuki and to a lesser extent in stocks like Bharti Airtel, Axis Bank and Reliance. Some of its interest mid-cap pics in the month of May 2023 were Metropolis Health, Shriram Finance, MRF (yes the stock just touched ₹1 lakh) and Manyavar.

HDFC Mutual Fund buys HDFC Ltd, sells ITC

The third largest fund by AUM also did some active churning in the month of May 2023. It aggressively added to its positions substantially in HDFC Ltd. Incidentally, the merger of HDFC Ltd and HDFC Bank is expected to be completed by the end of this year. The fund added smaller quantities of HDFC Bank, Infosys, and Reliance. It stayed neutral in a number of stocks like SBI, Axis and Bharti Airtel.

HDFC was also paring positions in the cigarette manufacturer, ITC Ltd. The stock has had a dream run since the start of the current year, especially after its FMCG business also started showing stellar results. The fund also moderately pared its positions in ICICI Bank. During the month of May 2023, HDFC Mutual Fund bought into select healthcare players like Global Health (Medanta), Mankind Pharma and Gland Pharma. Looks like pharma is the new kid on the block for the mutual funds.

Nippon India MF likes NTPC, cuts positions in many stocks

Once upon a time, Nippon India MF was called Reliance Mutual Fund and was the leading fund by AUM. Over time it lost to the bancassurance players but has made a bounce after being taken over by Nippon Group. But it still remains a very respected and formidable player in the mutual funds space. In May 2023, the fund added NTPC and Axis Bank, but stayed neutral on two of India[‘s largest oil plays viz. Reliance and ONGC.

The stock was aggressive on the sell side in May 2023. Nippon India MF aggressively cut its positions in HFDC Bank, Powergrid Corporation, SBI, Coal India and ICICI Bank. Its top mid-cap picks for the month of May 2023 included Mankind Pharma (once again), Astra Microwave (defence play), Exide Industries and Jubilant Foodworks.

UTI Mutual Fund was long on Infy, but sold into Kotak Bank

Finally, let us look at what the oldest mutual fund in India bought and sold in the month of May 2023. UTI MF added to its holdings in Infosys, Reliance, HDFC, Axis Bank and TCS; that is quite a long and impressive list, but was neutral on ICICI Bank and HDFC Bank. However, UTI Mutual Fund was aggressive in cutting positions in Kotak Mahindra Bank, ITC, and Bajaj Finance. Some of its preferred mid-cap picks in the month include IDFC, Biocon and M&M Financial Services.