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Funds Offload Banking Stocks

At the receiving end of fund managers’ ‘sell’ call were banking stocks

Almost everybody involved in the stock markets was buying in the month of May pushing stock prices to new highs. Yes, but at the other end of the spectrum are those who were selling their stock holdings either to book profits or to liquefy the assets that they can no longer afford to hold or for any other reason.

With the equity markets on a roll over the past three months delivering huge gains month after month now, stock prices for May were as energising as they could be. It seems mutual fund managers tried to make use of this rally to book some gains by selling their shareholdings.

Here we take a look at which stocks mutual funds sold the most.

At the top of the list of sectors in which fund managers offloaded the most stocks was banking. Among the top 10 stocks, which were sold by mutual funds in the month of May, seven stocks were from the financial sector -- six banks plus Infrastructure Development Finance Corporation (IDFC).

The formation of the new government at the Centre, after the Parliamentary elections were concluded successfully, raised hopes for the likelihood of reforms being effected in the financial and banking sectors and that give further fillip to market sentiments –- among the best indices was the BSE Bankex, delivering an impressive return of 45.26 per cent in May.

The banking stock, as well as the most-sold stock across all categories, was that of the biggest Indian lender, the State Bank Of India (SBI). Mutual funds sold stock worth Rs 542.69 crore in SBI -- SBI stock had gained by 46.29 per cent in May. The fund house that offloaded the highest number of SBI shares was ICICI Mutual Fund. It sold SBI shares worth Rs 215 crore while HDFC Mutual Fund occupied the second spot in terms of the number of SBI shares that it sold -- Rs 125.20 crore.

The second-highest offloaded stock was that of ICICI Bank. It had outperformed even the BSE Bankex index by gaining 55 per cent during the month. Mutual funds sold ICICI Bank stock worth Rs 288.25 crore and the fund house that sold the highest number of ICICI Bank shares was HDFC Mutual Fund -- worth Rs 47 crore.

It wasn’t the case that mutual funds were quick to just book profits blindly, but as market conditions changed, their attitude became aggressive and that meant they no longer wanted to buy into the defensive sector, like FMCG -- they gave a low weightage to the stocks of this sector. Mutual funds sold shares worth Rs 541.58 crore in the sector in May.

For example, the stock of Hindustan Unilever (HUL), which gained prestige during the market crash of 2008 due to its defensive capabilities, did not fall as badly as the rest of the sectors, was sold to the tune of Rs 217.71 crore by mutual funds  -- the stock fell by 1.47 per cent during the month. Indicating the mass-scale disenchantment with the stock in the midst of a market rally, 24 funds made an exit out of the stock, bringing down the number of open-end funds invested in the stock to 130 in May. DSP Black Rock Mutual Fund offloaded the highest number of shares worth Rs 76 crore and close to it was Reliance Mutual Fund which sold shares worth Rs 56.55 crore.

Another stock from the FMCG sector-- Nestle India was among the top-most sold stocks. While seven funds exited from the stock, on the whole, open-end funds sold shares worth Rs 107 crore -- the stock still managed to stay afloat, instead of sinking into red, with a 1.26 per cent gain during the month.

Mutual funds also sold Axis Bank stocks worth Rs 216 crore and five funds exited out of the stock -- the stock managed to gain a mammoth 40.99 per cent during the month despite the negative sentiment being rife against it in the mutual fund industry. Franklin Templeton Mutual Fund sold the highest number of shares in Axis Bank -- worth Rs 140 crore.

NOTE: All data is of open-end mutual funds.

Top 10 Most-Sold Stocks
Stock  Value of shares sold (Rs cr)  May Returns (%)  Fund Still Invested in Scrip*
SBI 542.69 46.29 213
ICICI Bank  288.25 55.04 214
HUL 217.71 -1.47 130
Axis Bank  216.31 40.99 106
HDFC Bank  138.04 31.04 184
Punjab National Bank 132.14 40.28 86
IDFC 122.29 62.98 71
Nestle India  106.72 1.26 52
Reliance Communications  100.19 42.27 121
United Phosphorus  80.51 41.52 90
*as on May 31, 2009
Note: The value of shares bought and sold is calculated by multiplying the difference in the number of shares by the average closing price of the company.