VR Logo

A concentrated bet

Analysing all mutual funds equity investments as a single portfolio holding reveals heavy concentration at the top

Considered as a single portfolio, mutual funds held 1,209 stocks as on March 31, 2014. We calculated the equity investments by considering the shareholding of mutual funds in individual stocks and then derived at the holdings in percentage of these stocks. The portfolio has a big head and a long tail, with the top 50 stocks taking up 70 per cent and the bottom 1,000 companies barely 6 percent. In the market as a whole, the top 50 stocks take up about 58 per cent of the capitalisation. Does this concentration show excessive risk? Probably not, as it is concentrated to the large cap stocks, which actually tend to be more stable.