May was a forgettable month for equities with all segments taking a beating but for many long-term investors, it was also an opportunity to realign their portfolio–booking profits where valuation was going beyond reasonable and picking stocks where value was emerging.
Top mutual funds also continued to shuffle their portfolios in line with their investment philosophy. Some tried to buy “pro-economy assets”, while others booked profits in stocks that had surged recently.
India’s largest mutual fund company, SBI Mutual Fund, bought 84 lakh shares of diversified conglomerate ITC in May. The stock price has surged recently, especially after the war in Europe improved the outlook of its agribusiness.
Besides ITC, the Rs 6.42 lakh crore money manager bought anywhere between 25 and 50 lakh shares each of Bandhan Bank, Mahindra & Mahindra Financial Services, ICICI Bank, KPR Mill, Infosys, NTPC, HDFC Bank, Oil & Natural Gas Corporation, NMDC, and Reliance Industries, data compiled by East India Securities shows.
The fund house sold between 10 and 50 lakh shares each of Bank of Baroda, Ashok Leyland, Lemon Tree Hotels, Tata Motors, Chennai Petroleum Corporation, Tech Mahindra, and Prism Johnson.
“The near term stays challenging. We, however, continue to see the interim turbulence as an opportunity to add on to pro-economy assets to benefit from a long-term manufacturing/capex led upcycle on the other side of the current inflation challenge,” SBI MF said in its monthly outlook.
It said rising prices and the challenge they pose to policymakers continue to be major headwinds for risky assets globally.
“Higher rates impact equity valuations adversely. Persistent higher inflation and rates may also adversely impact demand, margins, and hence corporate earnings. This is already reflected in earnings downgrades outweighing upgrades in India with nearly 3 in 4 stocks seeing earnings being revised downwards,” SBI MF said
At HDFC Mutual Fund, where the fund managers’ team is led by Prashant Jain, the strategy was a little different. It continued to sell some of the government-owned energy and utility companies for a third straight month.
The fund house sold 22 lakh to 3 crore shares each of NTPC, NHPC, GAIL (India), Power Grid Corporation Of India, Exide Industries, ITC, Tata Motors, State Bank of India, and CESC in May.
Durig the same period, it bought between 20 lakh and 1.1 crore shares each of Zee Entertainment Enterprises, HDFC Bank, Ashok Leyland, Infosys, Bank of Baroda, HDFC, Gateway Distriparks, Delta Corp, HCL Technologies, Tata Consultancy Services, SBI Cards and PCBL.
Jain, who is the chief investment officer of the fund house, believes risk-reward in the market is turning attractive. In a recent interaction, he said the next few months would offer a good opportunity to buy Indian equities at reasonable values.
ICICI Prudential Mutual Fund seems to have some of the names that HDFC MF sold in May.
The team led by S Naren bought 1-3.4 crore shares of Oil & Natural Gas Corporation, NTPC, Hindalco Industries and Bharti Airtel. Besides, it bought Infosys, State Bank of India, HDFC Bank, SJVN, Tech Mahindra, and Samvardhana Motherson International in large amounts.
At the same time, the fund house sold shares of ITC, GAIL (India), Mahindra & Mahindra, Mangalore Refinery And Petrochemicals, IDFC First Bank, Housing Development Finance Corporation, and Indus Towers.