 "Capital goods stocks back on fund managers' radar")
Shares of capital goods companies are back on India's equity mutual fund managers' radar after three years.
The share of allocation to capital goods firms in the total equity assets under management (AUM) stood at a 39-month high of 4.5 per cent in December. This was earlier seen in September 2011. In absolute terms, capital goods stocks accounted for Rs 14,970 crore of the total equity AUM of Rs 3.33 lakh crore in December.
With improvement in the country's macro economic factors and likely cuts in interest rates, fund managers are raising their exposure to the sector.
Till 2009, the capital goods sector was the most sought, after banks, by fund managers. From an exposure of nearly eight per cent in early 2010, allocations to the sector kept dwindling and hit a bottom of a mere 2.3 per cent in September 2013.
However, since then, fund managers have steadily kept buying shares of capital goods companies, taking the exposure to a high of 4.5 per cent as on December.
Sunil Singhania, CIO (equity) at Reliance MF, says: “Everything which could go wrong went wrong (in the past few years) and we had touched a bottom. Now, we have a stable government and a fiscal deficit and inflation under control. All macro economic factors are turning positive.”
In the past few years, capital goods were sidelined from fund managers’ portfolio. Instead, information technology, pharmaceuticals, fast moving consumer goods and automobiles emerged as the top picks, along with the banking sector. The cycle is turning.
Navneet Munot, CIO at SBI Mutual Fund, says: “The laggard in the last regime would be among the first beneficiaries of policy changes. We expect the early cycle benefits of recovery should flow to sectors like power and the industrial sector.”
The early call on buying into capital goods has paid well for fund managers. During calendar year 2014, the BSE Capital Goods index gained 50 per cent, a jump from 10,264 to 15,442.
The share of allocation to capital goods firms in the total equity assets under management (AUM) stood at a 39-month high of 4.5 per cent in December. This was earlier seen in September 2011. In absolute terms, capital goods stocks accounted for Rs 14,970 crore of the total equity AUM of Rs 3.33 lakh crore in December.
With improvement in the country's macro economic factors and likely cuts in interest rates, fund managers are raising their exposure to the sector.
Till 2009, the capital goods sector was the most sought, after banks, by fund managers. From an exposure of nearly eight per cent in early 2010, allocations to the sector kept dwindling and hit a bottom of a mere 2.3 per cent in September 2013.
However, since then, fund managers have steadily kept buying shares of capital goods companies, taking the exposure to a high of 4.5 per cent as on December.
Sunil Singhania, CIO (equity) at Reliance MF, says: “Everything which could go wrong went wrong (in the past few years) and we had touched a bottom. Now, we have a stable government and a fiscal deficit and inflation under control. All macro economic factors are turning positive.”
In the past few years, capital goods were sidelined from fund managers’ portfolio. Instead, information technology, pharmaceuticals, fast moving consumer goods and automobiles emerged as the top picks, along with the banking sector. The cycle is turning.
Navneet Munot, CIO at SBI Mutual Fund, says: “The laggard in the last regime would be among the first beneficiaries of policy changes. We expect the early cycle benefits of recovery should flow to sectors like power and the industrial sector.”
The early call on buying into capital goods has paid well for fund managers. During calendar year 2014, the BSE Capital Goods index gained 50 per cent, a jump from 10,264 to 15,442.