MFs exit FMCG, auto, pharma, PSU counters

A comparative analysis of the portfolios of equity-oriented mutual fund schemes on November 30, 2003 and on October 31, 2003 shows that fund houses have quietly exited leading stocks in two-wheelers, large-cap pharmaceuticals, FMCG and PSU segments.

For instance, in the two-wheelers segment, Bajaj Auto is out of the portfolios of as many as 29 schemes while 35 schemes have exited the Hero Honda counter in the last one month.

Some of the leading funds that have sold off Bajaj Auto holdings in this period are HDFC India Top 200, JM Equity, Alliance Equity Fund while funds like Birla Advantage Fund, DSPML Top 100 have offloaded the Hero Honda stock.

Among auto stocks, Mahindra & Mahindra was out of favour with 32 fund schemes, while Maruti Udyog was offloaded by at least 50 schemes.

Fund managers say an exit out of the auto segment was largely to realise profits. Funds which had invested in the Maruti public offer were sitting on at least 100 per cent profits, which they need to encash.

Some of the leading funds that have sold off Maruti Udyog in the last month were Franklin India Bluechip Fund, Reliance Vision and Tata Pure Equity Fund.

Ashok Leyland, another automobile major, was also out of the portfolios of 25 funds during the period.

Similarly, the funds seem to have exited the PSU stocks en masse. Dealers said this was due to "fatigue, as funds cannot hold on infinitely to the disinvestment story when there are better profit opportunities in the market."

As a result, 65 schemes cut their exposure in Bharat Heavy Electricals Ltd, 49 schemes offloaded their holdings in Bharat Petroleum Corporation Ltd, 26 schemes in Oil and Natural Gas Corporation, 36 schemes in GAIL India Ltd, 29 schemes in Steel Authority of India Ltd, and 20 schemes in the Shipping Corporation of India.

Fund managers cut their exposures to FMCG stocks due to lower-than-expected revival in the sector. About 52 schemes reduced their holdings in Hindustan Lever Ltd and another 75 schemes opted out of ITC.

Other FMCG scrips that went out of favour with funds include: Glaxo SmithKline Beecham Consumer Care (20 schemes) and Dabur (15 schemes).

Many fund managers have sold off these stocks to take fresh positions in December, according to industry sources.

Profit booking was apparent in bank scrips too. As many as 82 schemes offloaded their holdings in the State Bank of India, 36 schemes sold off the Oriental Bank of Commerce stock and at least 16 schemes pared their exposure in Canara Bank.

Market sources said the next big trigger in banking stocks is expected with the December results, but banks may not be able to report such high trading profits as they have done the past.

The high valuations in large-cap pharma counters has also prompted funds to realise gains. Examples of such stocks are Dr Reddy's Laboratories from which 48 funds exited in November, and Ranbaxy which was shunned by as many as 80 funds.

Other scrips from which mutual funds made significant exits were index heavyweights such as Reliance Industries and Infosys Technologies.

Digital Globalsoft and HCL Technologies also came under the selloff wave due to corporate actions which lead to sharp spikes in share prices and consequent expectations that such realisations may not be sustained.

Data source:
mutualfundindia.com