Mutual fund managers increase RIL holdings

SBI, Infy and BoB also get attention from the top five fund schemes.

India’s top valued company, Reliance Industries (RIL), saw renewed interest from mutual fund managers in September.

The RIL stock, which hit a 104-week, or, two-year low of Rs 713.55 on August 26, saw buying from the top five mutual fund schemes — HDFC Top 200, HDFC Equity, Reliance Growth, SBI Magnum Taxgain and ICICI Prudential Dynamic. Collectively, these schemes manage close to Rs 35,500 crore, or, a fifth of the industry's overall equity assets of around Rs 175,000 crore.

While HDFC Top 200 increased its stake from 3.87 per cent to 4.74 per cent, HDFC Equity raised it to 3.16 per cent from 2.74 per cent. The chief investment officer of a leading fund house said, “Many fund managers were underweight on RIL. However, given the massive hammering the counter witnessed, it became irresistible not to pick it.”

According to him, the markets had factored in all the negatives surrounding the stock, including the CAG report. He did not wish to be named as the query was stock specific. The Fund manager feels the stock may not see further decline.

Other large-cap stocks which saw some interest from these fund managers include State Bank of India, Infosys and Bank of Baroda. However, not all managers were bullish on these. For instance, ICICI Pru Dynamic Fund pruned its holdings in Infosys from 9.77 per cent to 6.65 per cent.

The month was marked by volatility in the stock markets. While the Bombay Stock Exchange benchmark, Sensex, lost 1.34 per cent of its value, the CNX Nifty witnessed an erosion of 1.15 per cent.

“Others like SBI and Bank of Baroda, too, emerged as attractive options. They may be currently facing challenges, but are fundamentally good banks. Once SBI’s NPA and asset quality issues are sorted , the counter can give better returns," added an equity head.
 

VALUATIONS TURN ATTRACTIVE Exposure of top fund houses in September
Scheme	RIL	SBI	Infosys	Bank of Baroda	AAUM* (Rs cr)
HDFC Top 200	4.74 (3.87)	6.69 (6.27)	5.45 (5.09)	3.20 (3.15)	10,692.11
HDFC Equity	3.16 (2.74)	7.99 (7.95)	4.71 (3.82)	3.31 (3.30)	9,432.92
Reliance Growth	3.77 (3.68)	2.99 (3.11)	2.22  (2.07)	4.55 (4.43)	6,275.61
Magnum Taxgain	4.08 (3.51)	2.27 (2.50)	2.15 (2.84)	No Holding	4,923.06
ICICI Pru Dynamic	10.14 (9.79)	1.40 (1.17)	6.65 (9.77)	No Holding	4,130.18
All figures in % of schemes’ equity assets; Figures in brackets indicate holding in August * As on September 30, 2011                                                                                                                Source : Value Research

Infosys was also hammered, as it fell close to Rs 2,000 before bouncing back. According to analysts, RIL is likely to report a better set of numbers during the September quarter. Deepak Pareek, analyst at Prabhudas Lilladher, said, "For RIL, any further downside was limited. Fundamentally, the level of Rs 700 offered a strong support . We believe the counter has headroom to perform and can go up to Rs 930.”

Analysts have given a buy call on SBI, with a target of around Rs 2,700. Though domestic loan growth for the lender would be muted, the international book would be positively impacted due to the rupee’s appreciation, they say.

Meanwhile, the top three companies where mutual funds cut their exposure during the month include Bharti Airtel, ICICI Bank and Tata Consultancy Services.

In September, mutual fund players turned net sellers in the markets, selling shares worth Rs 777 crore. In the previous month, fund houses had touched a three-year record buying of Rs 2,500 crore.