Fund houses changing strategy to cash in on rally

To cash in on sudden euphoria in the equity markets mutual fund houses say that they will “slightly” rebalancing their portfolios to take advantage of the rally. Up until now, fund houses were playing it safe by buying into defensive sectors like consumer discretionary and FMCG, now are evaluating to see which sectors to buying to.

The sideways markets have been hurting the mutual fund industry. The industry saw equity folios come down drastically and investors were seen stopping their systematic investment plans (SIP).

However, in the last two weeks the Sensex has gone up more than five per  cent  thanks to  the recent reform measures taken by the Government. Foreign institutional investors have been net buyers of equities to  the tune of Rs 10, 317 crore over the last two weeks.

Though domestic institutions have been net sellers, they plan on booking profits in certain sectors and buying into sectors they think will bear fruit during this rally.

S Naren, Chief Investment Officer- Equities at ICICI Prudential Asset Management says that the fund house they plan on increasing their allocation slightly to rate sensitive sectors like banking especially public sector banking stocks. “We will be under weight consumer discretionary as consumption is likely to come down as prices of consumer durables will go up further. We are looking at booking some profit in these stocks and buying into sectors like infrastructure and export oriented stocks like technology and telecom.”

Though fund houses will be looking at rebalancing their portfolios, they will not be changing their portfolios dramatically. A CIO of a fund house who did not wish to be names said that they will be looking at changing their portfolio marginally and that they will rebalance slightly. “We intend to booking slight profits in defensive sectors and allocate some amount of money to select infrastructure stocks and PSU banking scrips”, he added.

Amongst the BSE sectoral indices Bankex has risen 11.6% in the last two weeks, Power by 5.7% and capital goods by 8.3%. Whereas the FMGC index has fallen 2.5% and consumer durables has gone up by close to 3%.