MFs raise bets on technology, autos and e-commerce; private banks, capital goods see lower allocations

The overall mutual fund industry’s assets under management rose 4.3 percent month-on-month to a record Rs 85.8 lakh crore in July. Equity AUM, including ELSS and index funds, increased 2.7 percent to Rs 41.8 lakh crore, helped by the rise in market indices and equity scheme sales.

 

Mutual funds increased their allocation to technology, automobiles and e-commerce stocks in July, while exposure to private banks, capital goods, oil and gas and other sectors moderated, according to Motilal Oswal Financial Services’ latest Fund Folio.

 

Technology’s weight in mutual fund portfolios rose to 6.6 percent in July from an all-time low of 5.9 percent in June, while automobile allocation increased for the third consecutive month to 8.9 percent. E-commerce also extended its gains, with its weight rising for the third straight month to an all-time high of 3.1 percent.

 

The shifts came as the Nifty gained 2.2 percent in July to close at 24,384, moving above the 24,000 mark after five months and ending higher for the second consecutive month.

 

Technology allocation increases

 

Technology saw one of the sharpest increases in mutual fund allocation, with its portfolio weight rising 70 basis points month-on-month to 6.6 percent in July. Despite the increase, the sector remained 140 basis points below its weight a year earlier.

 

The increase marks a reversal after technology’s allocation fell to an all-time low of 5.9 percent in June.

 

Automobiles continued to gain favour, with the sector’s weight rising 30 basis points month-on-month to 8.9 percent. Its allocation was also 80 basis points higher than a year earlier.

 

E-commerce was another key beneficiary. Its weight climbed 30 basis points to 3.1 percent in July, marking a third consecutive monthly increase and taking the sector to an all-time high. Its weight was 80 basis points higher year-on-year.

 

Mutual funds also increased their allocation to healthcare, NBFC-lending and telecom during the month.

 

Private banks, capital goods lose weight

 

Private banks, the largest sector allocation in mutual fund portfolios, saw their weight decline to 17.4 percent in July, down 50 basis points from both the previous month and a year earlier, according to Motilal Oswal.

 

Capital goods also saw a reversal after reaching a 24-month high of 8.1 percent in June. Its weight fell 50 basis points to 7.6 percent in July, although it remained 30 basis points higher than a year earlier.

 

Allocations to utilities, oil and gas, PSU banks, retail, insurance and consumer durables also moderated during the month.

 

NBFCs, healthcare among key overweight sectors

 

The shift in sector allocation was also visible when mutual fund ownership was compared with the BSE 200.

 

NBFC-non-lending and healthcare were the sectors where the largest number of funds were overweight by at least 1 percentage point, with 15 funds each. E-commerce followed with 10 funds, while capital goods and chemicals were over-owned by nine funds each.

 

Oil and gas had the highest number of funds underweight by at least 1 percentage point, with 19 funds below their BSE 200 weight. Private banks followed with 15 funds, while consumer, PSU banks and utilities were under-owned by 14, 12 and 11 funds, respectively.

 

Bharti Airtel, Infosys see biggest rise in MF holdings

 

At the stock level, mutual fund positioning was divergent even within sectors. Bharti Airtel recorded the largest month-on-month increase in the value of mutual fund holdings, followed by Infosys, Bajaj Finance, ICICI Bank, M&M, Eternal, TCS, Torrent Pharma, HCL Technologies and Adani Enterprises, Motilal Oswal said.

 

HDFC Bank saw the biggest decline in the value of mutual fund holdings during July. Axis Bank, L&T, Varun Beverages, Trent, Bharat Electronics, Dr Reddy’s Laboratories, Avenue Supermarts, Bank of Baroda and NTPC were among the other stocks that recorded the largest declines.

 

Mutual fund AUM hits record high

 

Equity scheme sales rose 2.3 percent month-on-month to Rs 79,800 crore, while redemptions increased 9.1 percent to Rs 53,600 crore. As a result, net equity inflows moderated to Rs 26,200 crore in July from Rs 28,900 crore in June.

 

SIP contributions remained resilient at Rs 31,960 crore, up 0.6 percent month-on-month and 12.3 percent year-on-year.