Banks, IT top mutual funds' January kitty

According to the data on mutual fund holdings for January, banks account for as high as 10.14 per cent of the total holdings of funds, followed by electricals (9.8 per cent), IT Consulting (8.76 per cent) and auto (7.14 per cent).

The stocks most widely held by mutual funds in January include Infosys (held by 158 schemes), Bhel (143), ONGC (125), Reliance Industries (141), SBI (132), ITC (145), L&T (111), ICICI Bank (108), Bharti Televentures (110) and TCS (95).

Analysts say the credit growth in excess of 30 per cent in case of banks has perked up the sentiment.

"All these favourite stocks of funds are blue chip or bellwether stocks. Infosys and TCS are two of the biggest IT companies in the country, while SBI and ICICI Bank are two of the country's biggest banks," said Manish Sonthalia, VP-equity strategy, Motilal Oswal Securities.

Power equipment companies like Bhel has shown strong order book visibility. The company has an order book of about Rs 32,000 crore. Observers say the return on equity of such stocks is expected to be good.

Stocks like Reliance Industries and ONGC are also the favourite buys of the funds. Sonthalia added the capex cycle boom among manufacturing companies augurs well for the banking sector and earnings are bound to go up with increased growth opportunities.

The same applies to companies in capital goods and electricals sector, he said. IT companies in India expect over 30 per cent earnings growth for FY06 and another 30 per cent growth in FY07 as well, which makes them an obvious buy for funds.

An analyst from a leading brokerage house, who tracks IT stocks has added there could be bonus offerings among the front-line IT stocks which could be a reason for holding these stocks.

The increasing purchasing power of consumers across the country is reflected clearly in the mutual fund holdings for the month of January. Most two-wheeler companies have been showing good monthly sales numbers.

The same is true for companies like Maruti Udyog and Tata Motors. An auto-analyst feels the growth in the two-wheeler segment will offset the depression in the four-wheeler segments.