Mutual funds sold shares in 51 large-cap stocks last quarter. Do you own any?

The Indian stock market has entered a highly volatile territory after a sharp slide during the last few trading sessions, just weeks after testing a previous peak in January. The rise in prices of crude oil due to the Russia-Ukraine war and its likely impact on Indian economy as well as impending interest rate increases have spooked investors.

The benchmark indices slid again in early trading on Tuesday only to bounce back to close the day with gains and started Wednesday with an upside. 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.

Indeed, the results of the state elections that would be declared on Thursday may give a better directional call for the market. However, the war in Europe would continue to be a risk factor as it could lead to a sharp run-up in oil prices and have a damaging impact not only on the manufacturing sector but also on overall inflation.

Foreign portfolio investors (FPIs) or foreign institutional investors (FIIs) have been the driver of local bourses historically, but mutual funds have also become significant in the last few years given the rush of local liquidity. So much so that the bull run after the March 2020 crash is largely attributed to the flow of cash into the domestic mutual funds, who have in turn pumped in money into the stock market.

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

In particular, they cut stake in 90 companies (as against 81 companies in the previous quarter ended September 30) that have a valuation of $1 billion or more last quarter. In contrast, they had increased stake in as many as 108 companies commanding a valuation of $1 billion or more.

Of these 90 companies, 51 were large-cap companies that saw MFs cut their holding last quarter.

Mutual fund managers were bearish on metal and mining stocks, selective FMCG companies, pharmaceuticals, technology and real estate firms, besides large PSU banks among others.

Check out: Why this credit rating firm has downgraded outlook for auto sector for next fiscal year

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 SBI, ONGC, Maruti Suzuki, Nestle, Tata Steel, JSW Steel, Tech Mahindra, Hindustan Zinc, Coal India and HDFC Life Insurance.

Among others, Cipla, Havells, InterGlobe Aviation, Marico, Tata Consumer, MphasiS, Muthoot Finance, Gland Pharma and Macrotech Developers witnessed local fund managers turn bearish.

Further lower down the order, Piramal Enterprises, Page Industries, Bosch, Tata Elxsi, Biocon, Godrej Properties, Canara Bank and Abbott India also saw MFs sell stake last quarter.

Hindustan Zinc, Mphasis, Gland Pharma, Page Industries, Biocon and Relaxo Footwears were among large caps that have seen MFs sell stake for two consecutive quarters now, showing their bearish stance.

The most significant cut in MF stake was just around 0.5% and that too in just four stocks—Piramal Enterprises, Page Industries, Minda Industries and Clean Science & Tech.

Also read: Low price stocks: These scrips are locked in the upper circuit on March 9