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MFs raise stake in over 200 BSE500 firms, 17 Sensex stocks in Q3; should you buy?

Investors should use the list to shortlist stocks for investment but at the same time use their own research as an investment into small & midcaps stocks could be tricky.

February 07, 2020 / 10:08 AM IST
 
 
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Mutual funds have added a whopping Rs 3.15 lakh crore, or 13 percent, to their asset base in 2019 raising it to to Rs 26.77 lakh crore at the end of December, up from Rs 23.62 lakh crore at the end of December 2018, as per the latest data available with the Association of Mutual Funds in India (Amfi) quoted by a PTI report.

Fund managers raised stake in as many as 243 BSE500 companies on a sequential basis in December quarter that includes names like Avanti Feeds, Jindal Steel, Gujarat Gas, Adani Enterprises, SAIL and Amber Enterprises, data from AceEquity showed.

More than 50 percent of the companies in which fund managers raised stake have given negative returns since September 2019.

Dewan Housing Finance, The Lakshmi Vilas Bank, Dishman Carbogen, InterGlobe Aviation, Aurobindo Pharma, GE Power, JustDial, and TeamLease were among the stocks that fell in double digits during September-January period.

mf holdings down

On the other hand, Avanti Feeds, Jindal Steel & Power, Gujarat Gas, Narayana Hrudayalaya, Adani Ent and Essel Propack were the top gainers in the mutual fund portfolios.

MF holdings

After a sharp fall seen in the broader market space, fund managers have been active in spotting opportunities in the small & midcap space, suggest experts which could turn out to be wealth creators in 2020.

“Midcaps and smallcaps have seen significant price correction in the last 2 years. This space seems to have now come out of corrective phase and has shown good traction since the last quarter, primarily driven by attractive valuations and bottoming of growth concerns,” Atish Matlawala, Sr Analyst, SSJ Finance and Securities told Moneycontrol.

“In 2020, we see mid and small-cap space outperform large-caps, with the caveat that investor’s focus on quality businesses cannot be diluted. Fund managers smelled opportunities in midcaps and small caps and have started to invest in these companies from the last few months,” he said.

MF investment in Sensex companies:

Fund managers raised stake in 17 Sensex companies sequentially in the December quarter. These include Axis Bank, Bajaj Auto, Bajaj Finance, Bharti Airtel, Hero MotoCorp, ITC, L&T and Maruti Suzuki.

They reduced stake in as many as 12 Sensex companies sequentially. The list includes Asian Paints, HCL Technologies, HDFC Bank, HDFC Ltd, M&M, ONGC, TCS and RIL.

Fund managers tend to raise stake in companies with strong fundamentals and are likely to post good performance in the long run once the momentum starts.

“Stocks in which fund managers raised stake has strong fundamentals for the long run and can give 20-30% returns here onward. Until and unless we find some fundamental changes which might hamper the performance of the company we are keeping the optimistic view on the mentioned stocks,” Ritesh Asher – Chief Strategy Officer at KIFS Trade Capital told Moneycontrol.

“All the stocks look fundamentally strong if we look at the long term horizon and the companies have also shown a very bold performance quarter on quarter and also the year on year results have been quite impressive,” he said.

What should investors do?

Investors should use the list to shortlist stocks for investment but at the same time use their own research as an investment into small & midcaps stocks could be tricky.

The recent price correction is an ideal opportunity to invest in clean mid and small caps, and while selecting one must also look for companies which have strong earning, better ROE, high EPS, and other valuations while making an investment decision.

“A typical health check of a company includes healthy ROE, strong consistent growth in the top and bottomline, operationally sound with a manageable working capital cycle translating to margins, ethically strong management with sound corporate governance policies, good gearing ratio and other healthy return ratios,” Nirali Shah, Senior Research Analyst, Samco Securities told Moneycontrol.

“Qualitative factors along with valuations provide cues for picking fundamentally sound stocks. Picking stocks without proper sanity checks can be extremely harmful to your portfolio,” said Shah.

Disclaimer: The views and investment tips expressed by investment experts on Moneycontrol.com are their own and not that of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.

Kshitij Anand
Kshitij Anand is the Editor Markets at Moneycontrol.
first published: Feb 7, 2020 10:08 am

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