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Top 10 Stocks for Funds

Some companies’ shares are a perennial favourite with fund managers, but changes do happen

There are always favourites. In school you have the so-called teacher’s pet, in offices you have the boss’ right-hand-man and in mutual funds you have the fund managers’ favourite stocks.

In each case, the individual or the entity has moved ahead of the rest of the pack because the person in authority has found in them a solid foundation for generating good returns in their own context.

While, at school and offices the deciding factor is quite nebulous and gives rise to strident opposition in the form of favouritism, but when it comes to hard numbers generated in the mutual fund industry, there is little room for doubt – the stocks concerned have come on the ‘most wanted’ list of funds because they offer the possibility of creating outstanding profit, year after year.

Here we look at the top 10 stock holdings in the mutual fund industry.

Funds’ perennial favourite is Reliance Industries, which is also at the top courtesy an investment in its shares to the extent of Rs 6,617.42 crore, with as many as 224 funds opting for it as of June end 2009. Its ability to retain fund managers’ interest is also evident from the fact that it has improved upon the number of funds holding its shares from 220 in June 2008, while the assets last year were Rs 6,364.77 crore.

The number two spot has changed since June 2008. With the global financial crisis casting uncertainty over the infotech sector, the second position, which was occupied by Infosys Technologies in June 2008, has been taken over by the largest bank in India, the State Bank of India – the extent of the leap made by SBI can be gauged from the fact that the bank was placed at the number 10 position last year in June. The amount invested in it also jumped from Rs 1,681.92 crore to Rs 4,326 crore in June 2009.

Among the top movers and shakers has been ICICI Bank, which has unseated Bharti Airtel from third spot. What is noticeable in this is that some 230 funds are invested in Bharti and in ICICI Bank some 205 funds and yet, the latter has overtaken the former. Even more intriguingly, in SBI, which is at second spot, only 195 funds are present.

Among the stocks that have disappeared from the top 10 list are Tata Steel, due to its massive debt overload as a result of Corus takeover, and Reliance Communications, perhaps due to the Department of Telecommunications ordering a special audit of 5 telecom majors and among them being both Bharti Airtel, and Reliance Communications on complaints of misreporting revenue.

That there is considerable competition in the industry is also evident from the fact that some new entrants have been able to push into the top 10 list. Among the new entrants into the most-sought stocks category in June 2009 as opposed to June 2008 are HDFC Bank and Reliance Infrastructure. While HDFC Bank has been churning out good results quarter-on-quarter for quite some time, Reliance Infrastructure is riding on the crest of the wave that has developed as result of the government announcements regarding huge spending being slated for infrastructure sector, some of which is going to go Reliance Infra’s way.

Top 10 Stocks Held by MFs - June 2009
ScripName   Asset Value   Total Shares (lakhs)    Fund Count
Reliance Industries Ltd.   6617.42   327.05   224
State Bank of India   4326.17   248.34   195
ICICI Bank Ltd.   4087.82   566.18   205
Bharti Airtel Ltd.   3925.13   489.36   230
Infosys Technologies Ltd.   3582.31   201.60   192
Oil & Natural Gas Corpn. Ltd.   3353.65   314.28   184
Larsen & Toubro Ltd.   2981.45   190.11   181
Bharat Heavy Electricals Ltd.   2371.03   107.56   176
HDFC Bank Ltd.   2203.74   147.73   171
Reliance Infrastructure Ltd.   1841.94   153.81   124


Top 10 Stocks Held by MFs - June 2008
ScripName   Asset Value   Total Shares (lakhs)   Fund Count
Reliance Industries Ltd.   6364.77   304.06   220
Infosys Technologies Ltd.   3068.87   176.91   168
Bharti Airtel Ltd.   2958.47   409.96   180
ICICI Bank Ltd.   2783.97   441.76   175
Larsen & Toubro Ltd.   2677.19   245.25   167
Bharat Heavy Electricals Ltd.   2316.88   167.82   176
Oil & Natural Gas Corpn. Ltd.   2149.01   263.78   132
Tata Steel Ltd.   2070.08   284.22   138
Reliance Communications Ltd.   2015.77   455.64   151
State Bank of India   1681.92   151.33   126