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In the quarter ended March, ICICI Bank replaced Infosys as the preferred pick of equity fund managers, according to a report by Sameer Hassija, senior investment analyst with Morningstar India.
“Infosys, which was the top-held stock by equity funds during the beginning of the quarter, dropped to the second place by the quarter-end. The stock price fell about five per cent and, at the same time, the total number of shares held in the portfolios of equity funds dropped from 27 million to 22 million,” the report said.
“ICICI Bank gained favour as the most popular stock. It was the rise of about 13 per cent in the stock price during the quarter that pushed the stock to the top of the chart. Though ICICI Bank witnessed a tremendous increase in the market value of shares held, by the end of the quarter, it saw a fall in the number of shares held by equity mutual funds. HDFC Bank, Bank of Baroda and State Bank of India also witnessed strong buying during the quarter,” it added.
Recently, brokerage firm UBS had downgraded its rating on Infosys to from ‘buy’ to ‘sell’ and slashed the target price by about a third to Rs 2,750 a share.
Sector watch
Hoping the new government at the Centre would be pro-reform and its policies would revive the economy, fund managers increased exposure to the financial services sector by two percentage points to 23.83 per cent in the March quarter, compared to the December 2013 quarter. Consumer cyclicals (13.59 per cent), technology (13.47 per cent), industrials (11.29 per cent) and energy (8.9 per cent) were the other sectors in which fund managers increased exposure.
However, defensive sectors such as health care and consumer defensives recorded a decline in interest, as investors offloaded stocks in favour of high-beta stocks, as key benchmark indices scaled record highs, the report said. “Equity mutual funds have steadily decreased exposure to mid-cap stocks and increased exposure to large-cap stocks through the past few quarters. They have also cut exposure to cash and cash equivalents through the past few quarters,” it said.
PSU stocks favoured
Public sector undertakings (PSUs) were the flavour of the quarter, with equity funds adding significant PSU stocks to their kitties. Market buzz the new government at the Centre might give PSU stocks a fillip likely spurred interest among equity fund managers.
Ashok Leyland, Federal Bank, Coal India, Power Grid Corporation and Rural Electrification Corporation were some of the other stocks bought by mutual funds in the March quarter, the report said.
Hope the new government would relax their subsidy burdens likely prompted managers to accumulate stocks in the oil & gas space such as those of Oil and Natural Gas Corporation, Indian Oil Corporation and GAIL India.
Bharti Airtel, Sesa Sterlite, NMDC, Jaiprakash Associates, Cairn India, Reliance Communications, IDFC and Idea Cellular were some of the stocks recorded substantial selling during the March quarter.
