Bajaj Finance is the favourite stock of mutual funds, ITC is the most sold

• Bajaj Finance was the most purchased stock by mutual funds, followed by Maruti Suzuki.
• ITC is where mutual funds have decreased their investment on profit booking after the stock climbed 50% this year.
• Despite a 57% slump in Zomato’s share price this year, mutual funds bought ₹505 crore of the stock.
• One of the biggest laggards of the year – IT sector companies like Infosys, Wipro, HCL Technologies were also on the list of stocks sold by mutual funds.

Indian markets have remained extremely volatile because of risky global indicators such as monetary policy tightening and potential recession. However, the return of foreign institutional investors (FIIs) in the last few months to the Indian markets has encouraged some buying.

So far in FY23, foreign portfolio investors (FPIs) have significantly decreased their stake in IT, while stockpiling auto and FMCG, said a report by YES Securities. Mutual funds however are betting on the financial sector and auto stocks.

Here are the stocks in which mutual funds increased their investments
Source: YES Securities, Data for July month, net asset value database

Bajaj Finance is top pick for mutual fund industry
Bajaj Finance was the top stock which saw the highest mutual fund buying. Analysts say the company has entered FY23 on a strong note as seen by its Q1 FY23 numbers.

“This performance was despite the continued disruption in business in the first half of the year, elevated level of credit costs and higher liquidity buffers. We believe strong AUM growth and earnings momentum would further accelerate from here on,” said a report by Sharekhan.

The report suggests that currently Bajaj Finance stock offers an attractive buying opportunity as it has corrected more than 10% from its 52-week high.

“Moreover, digital transformation and omnichannel strategy is likely to bode well for its growth objectives along with operational efficiencies going ahead,” said the report.

Another stock that saw the highest buying was automaker Maruti Suzuki India. The stock has surged almost 30% in the last six months as new launches by the company received strong responses.

“Maruti Suzuki India is expected to witness a recovery in domestic demand with sales volume sustaining growth, despite near-term challenges of electronic component shortage. Sales enquiries remain strong with an order book currently at more than 3.5 lakh units. New launches, Brezza and Grand Vitara, have received a strong response from customers, with order booking of more than 90,000 units in a short span of time. We expect growth momentum to continue in FY2023E, driven by normalisation of economic activity and improving rural sentiments,” said a report by Sharekhan.

However, the surprise in the pack was Zomato. Despite a 57% slump in Zomato’s share price this year, it has found favour with the mutual fund companies – with buying worth ₹505 crore.

MFs decreased their investments in these stocks

ITC was sold off the most by mutual funds
ITC is the top stock in the list that saw mutual funds decreasing their investments. Interestingly, the Kolkata-based FMCG-to-cigarette conglomerate’s stock has climbed 50% this year led by strong financials in previous quarters.

The aggregate data of the industry shows that most mutual fund companies have sold their stake in ITC. Most of the selling in the stock could be because of profit booking as a strong rally in the stock was witnessed after many years.

PPFAS MF has said that while the stock continues to be reasonably valued, its attractiveness has come down.

“We were buyers in ITC (earlier) and bulk of the purchases were made between a price of ₹140 and ₹210. While the stock continues to be reasonably valued, the attractiveness has obviously reduced a bit given the doubling of the stock price from the lows,” said Parag Parikh Financial Advisory Services (PPFAS) Asset Management Company’s Rajeev Thakkar in a monthly fact sheet.

However, as of July, PPFAS AMC has cut its holdings in ITC to 7.48% of its total assets under management (AUM) from 9.18% in June,

One of the biggest laggards of the year – IT sector companies like Infosys, Wipro, HCL Technologies also made it to the ‘sell’ list.

The HDFC twins, which have been struggling to deliver returns this year, were also on the list amid ongoing procedures to merge HDFC with HDFC Bank.

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