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Funds Book Profits

July turned out to be a good month for the markets & the funds, with the latter booking profits

A look at the mutual fund portfolios in the month of July 2008 tells the story of a market recovery. The portfolios were more concentrated during the month, which was an effect of the rise in the capital market indices. The Sensex was up by nearly six per cent in July and the BSE mid- and small-cap indices ended the month in green as well.

And fortunately, this momentum has registered by mutual funds as well. The combined assets stood at nearly Rs. 1.08 lakh crore in July, up from Rs. 1.02 lakh crore in the month before. The assets were spread over a total of 803 stocks of which, the top 10 stocks accounted for 30 per cent. 28 stocks accounted for the first 50 per cent of the assets and the bottom 10 per cent was made up of 342 stocks, much less from the 618 stocks that made up the bottom 10 per cent in June.

July was the same as June with the large-cap companies being dominant. They accounted for 57 per cent of the total fund assets while the mid-caps made up 30 per cent. The small-caps accounted for a mere 13 per cent.

The fraternity of open-ended equity funds turned out to be net buyers of shares worth nearly Rs 688 crore in July. While funds had stacked up on large- and mid-cap stocks, the small-cap stocks were offloaded in chunks. The net buying by funds in the large-cap companies amounted to Rs nearly 600 crore and in mid-cap companies it amounted to Rs 190 crore. But at the same time, funds eluded small-cap companies this time and turned net sellers of shares worth nearly Rs 117 crore.

HDFC was the most favoured pick of the month. Funds purchased shares worth a whopping Rs 350 crore in the second largest private sector bank. That’s not all, 30 new funds added the company on their portfolio. Other favoured stocks were Oil & Natural Gas Corporation and Axis Bank. The prices of all these stocks went up in July. The large-cap purchases were dominated by companies from the financial services and energy sector whereas the mid and small cap purchases were fairly diversified.

On the other hand, Tata Steel, Bharat Heavy Electricals and Reliance Industries were the most sold stocks of the month. Tata Steel was down by nearly 10 per cent in the month whereas the prices of Bharat Heavy Electricals and Reliance Industries went up in July.

All in all, when the markets went up in July, funds were quick to grab opportunity and booked profits in most of the well known stocks. This is evident from the total sale of a whopping Rs 2330 crore worth of shares in large cap companies in July which was a far cry from the Rs 920 crore worth of sale in June.