 "Funds cut exposure to banks, automobiles")
Amid a steep fall in stock prices in January, stock mutual funds' exposure to most-invested sectors has seen a churn.
Allocations to previously favoured sectors — banks and automobiles — have seen a decline while information technology, pharmaceuticals, and FMCG (fast-moving consumer goods) have continued to gain. This happened during a period which saw key indices lose eight per cent in a month.
Stocks of banks are in focus. With continuous bleeding in these stocks — both public and private banks — all stock Assets Under Management have slipped to 19 per cent. A few months ago, funds had allocated 22 per cent of their stock Assets Under Management in banks.
The automobile sector, which had inched up to the second-most invested, has now lost its position to information technology stocks.
Defensive sectors — pharma and FMCG — have gained prominence as market uncertainty deepens. In tumultuous times, funds favour these stocks as they offer more stability compared with high-beta stocks such as banks. If a stock's beta is 1.2, it’s 20 per cent more volatile than the market. Most high-tech, Nasdaq-based stocks have a beta greater than one, offering the possibility of a higher rate of return, but also posing more risk.
Though there is not a substantial rise in exposure to pharmaceuticals and FMCG, funds are showing a steady stance on these two, to curtail further erosion of wealth. Allocation of stock assets to pharma increased a bit to 8.3 per cent — a rise of six basis points (bps), while in FMCG, the exposure went up five bps to 5.5 per cent.
A chief investment officer says, "If you look at the market trend in January, shares of banks and automobiles were beaten harshly compared with IT, pharma, or FMCG stocks. So, it was obvious to see a decline in allocation, as it was mark-to-market valuation. (Mark-to-market is an accounting method that records the value of an asset according to its current market price. For example, the stocks you hold in your brokerage account are marked-to-market every day. At the closing bell, the price assigned to each of your stocks is the price that the larger market of buyers and sellers decided it would be at the end of the day. No other pricing information is included.) It may not mean fund managers are going underweight on automobiles and banks. Change in exposure percentage in January was largely because of mark-to-market valuation and not necessarily because we were selling or buying a sector prominently." Funds had pumped Rs 7,400 crore in stocks in January. As on January 31, the total stock Assets Under Management were down to Rs 3.8 lakh crore against over Rs 4 lakh crore as on December 31.
