SBI: Equity fund managers face googly

Call of raising exposure on counter backfired equity schemes as shares tank 15% post poor results

State Bank of India (SBI), the country’s largest lender, has turned out to be a googly for equity fund managers, who had been betting big on the counter.

Close to 15 per cent fall in the stock price after the lender's earnings announcement proved a nightmare for the investment managers as several large diversified equity schemes had increased their exposure in SBI in April in anticipation of better results and interest rates cut.

Some of them had SBI as one of the top five picks with as high as four-nine per cent of schemes' overall assets pumped into the counter. However, the call did not go well. The counter crashed almost 10 per cent in May affecting schemes' net asset value (NAV). The counter, which rallied almost seven per cent in the first half of the month, lost more than double the gains it made in the latter half.

The ountry's leading equity diversified schemes, including HDFC Top 200, HDFC Equity, HDFC Prudence, Reliance Growth, UTI Dividend Yield, IDFC Premier Equity, Birla Sun Life Frontline Equity, ICICI Pru Focussed Blue Chip Equity and ICICI Pru Dyanamic had all witnessed a rise in exposure to shares of SBI during April.

On its results announcement day alone, shares of SBI had a free fall eroding eight per cent of investors' wealth. The lender posted a decline of 18.5 per cent in its net profit during the March quarter at Rs 3,299 crore against Rs 4,050 crore in the previous corresponding quarter.

The steep decline in stock prices did not stop there. In the remaining trading sessions, the counter lost yet another 5 per cent. The fall was despite a reasonable dividend payout announcement of Rs 41.5 per share by SBI.

"It's an uncertain market and in one day, the entire gains made were lost. However, we do not take a short-term trade call and our conviction remains with the banking sector and India's growth story," says the equity head at a large fund house, who chose to raise exposure on SBI.

It is not the first case of its kind in recent times where fund managers got on the wrong footing in their investment call on heavyweight counter. Another heavy weight counter, Infosys, had given fund managers' a chase after they missed the unexpected rally in the March quarter.

Shares of Infosys had rallied close to 30 per cent in a matter of few months, which had surprised fund managers who had cut their holdings in December last year.