In June, the equity assets of funds fell by 17%. See what the managers bought to steady themselves
14-Jul-2008 •Research Desk
As we all know by now, June was yet another dismal month for the Indian stock markets. In fact, June turned out to be one of the worst hit months since the markets starting going down in January. The combined equity assets of funds that stood at Rs. 1.22 lakh crore at the end of May, had declined to around Rs. 1 lakh crore in June. While the markets fell by around 18 per cent in the month, the total equity assets of funds declined by 17 per cent.
The combined equity holding of funds was spread over a total of 815 stocks. Of these, the top 10 stocks accounted for around 30 per cent of the total assets and 72 stocks accounted for around 70 per cent of the assets. The bottom 10 per cent of the assets was massively diversified among 618 stocks.
During this time, the fund managers predictably tried their best to keep their heads above the water by stacking up on some stocks while offloading others. Let’s take a look at what lured the fund managers in the unpredictable month of June.
The soaring interest rates had not deterred the funds from investing in the sensitive Financial Services Sector. In terms of number of shares, Infrastructure Finance Corporation was the most bought stock in the month. Funds bought 151 lakh shares of the company in June amounting to Rs 156 crore. Funds also increased their holdings in other stocks from the sector by buying chunks of shares in IFCI, Development Credit Bank, ICICI Bank and HDFC Bank. 18 more funds added HDFC Bank to their portfolios while ICICI Bank was picked up by 12. Fund managers opted for these stocks though their prices fell steeply in the month. While prices of IFCI and Development Credit Bank fell by as much as 40 per cent, other stocks also fell by over 20 per cent.
With the rupee turning weaker, the technology stocks were back in vogue. Tech majors Tata Consultancy Services and Satyam were bought in chunks. While 15 funds added Tata Consultancy, nine picked up Satyam Computer Services. Funds bought 18 lakh shares (worth Rs 157 crore) in Tata Consultancy and 8.9 lakh shares (worth 39 crore) in Satyam Computer Sevices. Small-cap stock MIC Electronics was also bought in large numbers (worth 39 crore) even though the stock was down by a whopping 86 per cent in June.
Funds also stacked up on telecommunication stocks like Bharti Airtel, Spice Communications and Tata Teleservices. Funds bought 75 Lakh shares (worth Rs 54 crore) in Spice Communications and 69 Lakh shares (worth Rs 483) in Bharti Airtel. 14 funds added Spice Communications and 12 added Bharti Airtel to their portfolios.
The energy sector also got some attention with 19 funds adding Reliance Petroleum and Tata Power to their portfolios. In June, funds bought 97 Lakh shares worth Rs 169 crore in Reliance Petroleum and 18 Lakh shares worth Rs 189 crore in Tata Power. While Reliance Petroleum fell by only 2 per cent in June, Tata Power had a much steeper fall of 22 per cent.
Stocks from the Consumer Non Durable sector also got popular in June with funds buying significant number of shares in Dabur India, Ballarpur Industries, Hindustan Unilever, Shree Renuka Sugars and Balrampur Chini Mills. While Dabur India went down by around 18 per cent in June, the rest of them fell by much lesser than the market.
In the Basic Engineering space, funds bought Suzlon Energy. In June, funds bought 63 lakh shares worth Rs 136 crore in the company though its price was down by 22 per cent. The stock has also been added up by seven new funds.
Pharma and Healthcare has also gained some popularity among funds in the bearish market. In June, funds further strengthened their position in the sector by buying shares in Pharma major Cipla and in Dr. Reddy's Laboratories. Nothing surprising about this though as both these stocks had managed to curtail their fall, with Cipla losing only 0.4 per cent and Dr. Reddy’s Laboratories falling by 6 per cent, which was much lower than the average market fall.