Mutual funds have been offloading these large-cap stocks. Did you sell any?

The Indian stock market has been in the grip of the bears for the past few weeks as the surprising monetary tightening move by the Indian central bank along with the US Federal Reserve’s rate hike and the continuing spectre of inflation fuelled by the high price of crude oil has affected investor sentiments.

The benchmark indices are now around 15% lower than the all-time peak touched in October last year. While many market pundits are seeing a bottom for the slide in prices, few do consider this as a ‘dead cat bounce’ that may give a false comfort level for investors to pump in cash.

Foreign portfolio investors (FPIs), or foreign institutional investors (FIIs), have been the driver of local bourses historically, but domestic mutual funds have become significant too in the last few years given the rush of local liquidity. So much so that the bull run of the last two years is largely attributed to the flow of cash into the domestic mutual funds, which have in turn pumped in money into the stock market.

Most local fund managers have been voicing concerns about the state of valuations, and quarterly shareholding data shows they cut stake in several companies.

In particular, they cut stake in 88 companies (as against 90 companies in the previous quarter ended December 31) that have a valuation of $1 billion or more last quarter. FIIs had sold stake in as many as 92 companies that have a valuation of $1 billion or more last quarter.

Of these 88 companies, 47 (against 51 in the previous quarter) were large-cap companies that saw MFs cut their holding last quarter.

Mutual fund managers were bearish on top IT, telecom, oil and gas, pharma and selective internet stocks among others.

Top large caps that MFs sold

If we look at the pack of large caps with market valuation of Rs 20,000 crore ($2.6 billion) or more, then MFs pulled down their stake in TCS, Bharti Airtel, Sun Pharma, ONGC, Adani Ports, Tata Steel, Tata Motors, NTPC, Pidilite, Grasim and Bajaj Auto.

Siemens, Shree Cements, Britannia, SRF, Berger and Nykaa were among the other large caps where the local fund managers pruned their stake.

Most of these were different stocks compared to the ones the MFs were bearish on in the preceding quarter, but a few common stocks in which they have cut stake for two consecutive quarters now include ONGC and Tata Steel.

The most significant cut in MF stake was just around 0.5% and that too in just one stock—Nykaa’s parent FSN E-Commerce.