Top MFs up stake in group companies

India’s top mutual fund (MF) houses' exposure to shares of their group companies has gone up over the past one year. The Rs 19-lakh-crore MF industry is dominated by ICICI Prudential Mutual Fund, HDFC MF, SBI MF, Birla Sun Life MF and Reliance Nippon MF. All these investment houses are backed by strong corporates and banks.

India's largest fund house ICICI Prudential MF’s equity schemes’ exposure to its parent company, ICICI Bank, has gone up 107 basis points in one year to 3.03 per cent in March. Similarly, collectively, schemes of Reliance Nippon Mutual Fund has increased its stake in Reliance Communications from 0.94 per cent a year ago to 1.12 per cent at the end of FY17.

SBI Mutual Fund’s exposure to State Bank of India is up at 1.15 per cent against 0.52 per cent, while Birla Sun Life Mutual Fund's holding in group companies such as Grasim Industries, Aditya Birla Nuvo, Idea Cellular and Hindalco Industries has gone up as well.

Fund managers and chief executive officers (CEOs) spoke to Business Standard regarding the issue wherein they denied undue preference for group companies' or parent companies' shares. "We have a professional investment team with strong research and analysis backing. Our investment calls are based on our research and are not and should not be dictated by our group companies," said the chief executive of one of the top five largest fund houses.

The past one year has witnessed increase in inflows in the equity segment. With robust fresh flows coming into equity schemes, fund managers are attempting to play safe, preferring selective large-cap companies. This also may have resulted in a high percentage of holding in group companies' total equity capital.

“If you look at stocks like HDFC Bank, ICICI Bank and State Bank of India — these counters have been broadly chased by almost everyone over the last few quarters. So spike in holdings is quite normal as it was a broad-based buying on these counters,” said Kaustubh Belapurkar, director (fund research) at Morningstar India.

HDFC Bank and ICICI Bank being two of the most stable private lenders and State Bank of India from the public sector space have been among the top priorities by India's fund managers. Over 530 schemes have allocated their assets to these two private lenders while around 425 schemes have exposure to State Bank of India. Along with them, stocks such as Tata Motors, Larsen & Toubro, HDFC, Grasim Industries and Hindalco were being preferred.