Domestic mutual funds turn homeward in December, pare global exposure

Domestic mutual funds shifted focus to India-facing growth stocks in December, increasing bets on financials, consumption and aviation while trimming global-facing names

Domestic mutual funds (MFs) tilted their portfolios towards stocks linked to India’s domestic growth theme in December, while trimming exposure to global-facing names, according to an analysis by Nuvama Alternative & Quantitative Research. 

Among the most-bought stocks during the month were ICICI Prudential AMC, InterGlobe Aviation, Swiggy, ICICI Bank, and Meesho. To create dry powder, fund managers pared holdings in stocks such as Infosys, Vedanta, and Lupin. 

Market participants said MFs had applied in the IPO of ICICI Prudential AMC and continued to buy the stock aggressively post-listing, citing strong long-term tailwinds from the rising financialisation of household savings. 

MFs also participated in Swiggy’s qualified institutional placement and Meesho’s IPO. Analysts expect Swiggy’s improving unit economics and leadership in food delivery to drive a potential re-rating, while Meesho is seen as a play on rural and Tier-II and 

-III consumption growth. 

The steep decline in InterGlobe Aviation’s (IndiGo parent firm) shares during operational disruptions in December provided an opportunity for fund managers to build positions in the country’s largest airline, they added. 

Meanwhile, selling in Infosys was largely attributed to muted growth visibility amid continued weakness in global technology spending.