Some of the companies in which fund managers reduced stake belong to auto names as well as metal names, and also companies that have posted strong gains in 2019.
Largecaps dominated the price action on D-Street for the past two years and the reflection was seen in the September quarter wherein fund managers toped blue chips in their buying list.
Fund managers raised their stake in as many as 388 companies in the quarter that ended on September when compared to the June quarter as seen from data collated on October 30 from Ace Equity.
Stocks in which fund managers raised their stake include names like Reliance Industries, TCS, HDFC Bank, HUL, HDFC Ltd, ITC, ICICI Bank, Bajaj Finance, Kotak Mahindra Bank, SBI, Axis Bank, L&T, Bharti Airtel, ONGC, Asian Paints, and Wipro, etc. among others.
“Blue chips are the flavor since early 2017. So, one cannot say that it is today’s theme but it is the continuation of the past theme,” Vishal Wagh, Research Head, Bonanza Portfolio, told Moneycontrol.
“It practically shows that next couple of years, funds may stick with bluechip or big midcap to protect their funds and reduce the risk of holding the risky small-cap and small midcap in the scenarios of lowering GDP day by day,” he said.
Preference for blue chips over small and mid-caps is a trend that is visible as fund managers move more risk-averse to avoid fund erosion.
Meanwhile, fund managers reduced their stake in as many as 297 companies in the September quarter when compared with the June quarter, data from AceEquity as of October 30 showed.
Companies in which fund managers reduced their stake included names like Bata India, MCX, PI Industries, Siemens, Infosys, Maruti Suzuki, Bandhan Bank, Hero MotoCorp, Tata Steel, Dabur India, M&M, etc. among others.
Some of the companies in which fund managers have reduced their stake belong to names in the auto and metal sectors, and also companies that have posted strong gains in 2019.
Fund managers have reduced their stake in as many as 15 companies out of 297 which have rallied over 50 percent in 2019. These include names like Reliance Nippon, HDFC AMC, Avas Financiers, Dr. Lal, Info Edge, PI Industries, HDFC Life Insurance, Bata India, and Siemens, etc. among others.
“It is appropriate to say that fund managers are booking profits in some of the names which have already rallied. All these companies had run up in valuations and had become very expensive. Therefore, some amount of profit booking was justified and funds would have reduced their stake in companies,” Umesh Mehta, Head of Research, Samco Securities told Moneycontrol.
“Typically, such stocks have to be sold on rallies rather than waiting for some weakness. Eg. Dr. Lal Pathlabs has corrected severely by 13 percent in just 4 days after having a run up of around 20 percent to its all-time high,” he said.
Should one follow the fund manager?
Investment bets taken by fund managers could be based on various parameters such as the risk appetite, time horizon, amount of capital to invest, etc. among others.
Investors can use the list of stocks to filter their stocks but blindly following a fund manager or different fund managers would not be a great idea.
“Investors must assess their capital requirements, investable surplus, time horizon and goals that they want to achieve before investing. Blindly aping a fund manager’s philosophy can turn out to be risky if the risk, goals and capital preferences vary,” said Mehta.
“Once a strategy is decided, the focus should be on time tested principles of quality health check-up such as High ROIs, consistent sales growth and profitability, low debt, sound working capital, efficient management, etc. rather than running behind fund managers,” he said.
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