MF holdings in Nifty firms at 10-year high

Sept marks 17th straight month of net investment by funds in equity markets

Domestic mutual funds (MFs), which pumped in a record Rs 25,000 crore in equities during the quarter ended September this year, have seen their holding in Nifty 50 companies touch the highest in a decade.

The shareholding data for the September quarter filed by these companies with stock exchanges showed MFs’ holding in Nifty 50 companies increased to 4.6 per cent in July-September from 4.1 per cent in the June quarter. In the September 2002 quarter, MFs held 4.8 per cent stake in Nifty 50 companies, Capitaline Plus data show. Since the Narendra Modi-led National Democratic Alliance government came to power at the Centre, fund managers have been bullish on the markets. Their combined holdings in Nifty 50 companies have increased 130 basis points, compared with 3.3 per cent in the quarter ended June 2014.

With a net investment of Rs 91,105 crore, September marks the 17th consecutive month of net investment by mutual funds in equity markets, data show.

Continuing their uptrend for the fourth consecutive quarter, retail mutual fund folios also rose in the September quarter by a record 1.51 million to 42.40 million. Overall, folios rose by 1.67 million or 3.9% in the September quarter, according to rating agency Crisil.

Navneet Munot, chief investment officer (CIO), SBI Funds Management, says: “Existing mutual fund schemes have seen inflows from investors. This has largely been due to the shifting of portfolios from physical assets to financial assets by domestic investors. Given the fresh flows, mutual funds’ relative holdings across the board, including Nifty 50 companies, has also seen a rise. I expect this trend to continue through the next year, with inflows from both retail and institutional investors coming in.”

 

Of the Nifty 50 companies, MFs increased their stake in 39 firms, by up to two percentage points. The reduction in stake in the 11 remaining firms was less than one percentage point.

MFs bought additional stake in all nine banks in the benchmark index. In IndusInd Bank, Bank of Baroda, YES Bank and Axis Bank, they raised their holdings by more than one percentage point each.

"The fact that interest rates are coming down and the latest 50 bps cut by the Reserve Bank of India (RBI) has enthused investors. That's why we perhaps saw some buying in the banking stocks. Mutual funds were probably a little less invested in the Banking, Financial services and Insurance (BFSI) segment, particularly the PSU side," says Taher Badshah, senior fund manager and co-head of equities at Motilal Oswal Asset Management.

"Overall, I think that domestic investor's appetite for equities in general is looking good. Given this, we should see more inflows from investors in mutual funds," he adds.

Foreign institutional investors (FIIs), on the other hand, have seen their ownership decline 40 bps compared to the June quarter. FIIs investment saw a net outflow of $2.58 billion (Rs 17,315 crore) from Indian equities during the quarter.