Mutual funds increase exposure to IT stocks to all-time high in September2 min read . Updated: 14 Oct 2020, 06:56 PM IST
- Equity funds’ weightage to IT stocks rose 140 basis points from previous month or 290 bps higher year-on-year
- These MFs command nearly 97% of the market share in terms of assets under management
Mumbai: Increase in priority for technology spend by corporates backed by a robust deal pipeline has led to investors piling up such stocks post covid. In September, mutual funds increased their exposure to technology stocks to an all-time high of 11.6%.
Equity funds’ weightage to IT stocks rose 140 basis points from previous month or 290 bps higher year-on-year, data for India’s top 20 domestic mutual fund houses shows. These MFs command nearly 97% of the market share in terms of assets under management (AUM).
During the month, mutual funds exposure to healthcare also increased to 55-month high to 8.7% rising 70 bps on monthly basis or 340 bps compared to same month last year, according to data sourced from the Association of Mutual Funds in India (AMFI) and NAV India analyzed by Motilal Oswal Financial Services Ltd.
“In September, five out of 10 stocks that saw maximum increase in value were from technology. Reliance Industries, Infosys, TCS, HCL Tech, Dr Reddy’s Labs, Tech Mahindra, Wipro, Cipla, Ipca Labs and Maruti Suzuki saw maximum increase in value month-on-month," said Deven Mistry, research analyst, Motilal Oswal Financial Services.
Analysts feel that management commentaries corroborate an encouraging outlook for Indian IT companies. During the last three months, IT companies saw demand normalize as their deal pipelines largely returned to pre-covid levels, with discussions being revived for deferred deals as well.
“Recovery during September was entirely driven by managed services. Within this, as we anticipated, the rebound was led by a strong comeback in BFSI across verticals. Increased activity in mega deals, contract restructuring and industry-specific BPO also aided the recovery," said analysts at ICICI Securities.
Overall, mutual funds were net buyers in 44% of stocks in the Nifty. However, mutual funds cut their exposure to private bank’s with their weightage slipping to 29-month low to 15.8% in September or 150 bps down compared to previous month and a whopping fall of 500 bps on a year-on-year basis.
According to data released by the Association of Mutual Funds in India (Amfi) on Thursday, net outflows into equity schemes stood at ₹1,009.01 crore in September, significantly lower from ₹4,028.83 crore and ₹3,845.41 crore in August and July respectively.
Meanwhile, Edelweiss Alternative Research and ACE MF data showed that mutual funds actively participated in a slew of IPOs that had hit the markets in September. The issues include Happiest Minds, Route Mobile, CAMS, Chemcon Speciality, Angel Broking and UTI AMC.