1 week ago
Mutual Funds Rotate Into Autos, Exchanges Amid Record-Low Cash
Mutual funds are moving money between different kinds of stocks.
In July, they bought more shares connected to cars and financial markets.
TVS Motor, Mahindra & Mahindra, Hyundai Motor India, BSE, MCX and Groww were among the beneficiaries.
They also increased interest in metals, defence and retail companies.
At the same time, they reduced investments in insurance, capital goods and some lending companies.
Funds have very little unused cash left, with dry powder at 7.3% of active assets.
This means they may have less money available if foreign investors sell heavily or markets fall.
CLSA says future fund activity may depend more on switching between existing holdings than on adding new money overall.
Domestic mutual funds’ available dry powder fell to a three-year-low 7.3% of active AUM in July.
TVS Motor, Mahindra & Mahindra and Hyundai Motor India gained active weight as autos led sector rotation.
BSE, Multi Commodity Exchange of India and Groww were among capital-markets beneficiaries.
Metals, defence and retailing gained preference, while insurance, capital goods and non-bank lenders saw cuts.
CLSA highlighted several recently sold stocks, including Axis Bank, Larsen & Toubro and State Bank of India, as potential opportunities.
- Who
- Domestic mutual funds, as analysed by CLSA.
- What
- Mutual funds shifted active portfolio weights toward selected automobile, capital-markets, metals, defence and retail stocks while cutting exposure to several other sectors.
- Where
- Indian equity markets and domestic mutual-fund portfolios.
- When
- July, with additional positioning changes measured over the preceding three months.
- Why
- Funds were rotating toward selected market segments, while hybrid funds increased equity allocations and left total available cash at a record-low level.
Key facts
- Total dry powder
- 7.3% of active AUM in July, down 15 basis points month-on-month and at a fresh three-year low.
- Pure equity fund cash
- 5.2% of AUM in July, close to record lows.
- Hybrid fund unallocated equity
- 16.4% of AUM after falling 72 basis points.
- Autos
- Active weight rose 24 basis points in July, led by TVS Motor, Mahindra & Mahindra and Hyundai Motor India.
- Capital markets
- Active weight increased 21 basis points, with BSE up 8 basis points, MCX up 4 basis points and Groww up 3 basis points.
- Largest sector cuts
- Insurance fell 19 basis points and capital goods fell 17 basis points in July.
- Private banks
- Overweight increased 39 basis points over three months, although active weight fell 11 basis points in July.
Quotes
CLSA
Brokerage whose analysis tracks domestic mutual-fund portfolios
“While Bajaj Finance has recently seen a pickup in interest, but positioning stays light and it could have more legs.”
financialexpress.com
“This depletes the ability of DMFs to absorb large foreign selling.”
financialexpress.com
Sources
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