This article will see the top ten mutual funds in India considering data as of August 2019. These top mutual fund holdings in India have the highest allocation in equity.
- As far as the equity-oriented mutual funds are concerned (funds having equity allocation), the total AUM as of August 2019 is around Rs.10.31 Lakh Crore.
- This AUM of Rs.10.31 Lakh Crore is contributed by :
- Pure Equity Funds
- Hybrid Oriented Funds (with Equity allocation)
- Index Funds
- Index ETFs
- Sectoral Funds
- It means the above all types of funds have made investments in stocks worth Rs.10.31 Lakh Crore.
- Indian Mutual Fund Industry’s Average Assets Under Management (AAUM) stood at Rs.25.64 Lakh Crore in August 2019. So, we can see, around 40% of the total AUM of the entire mutual fund industry is contributed from investments in stocks.
Total AUM of Equity Mutual Funds
Which are the top 10 mutual fund companies in India to invest now that contribute to this 10.31 lakh Crore AUM?
Not surprisingly, out of these top 10 mutual fund companies, six belong to the banking and financial services sector (3 corporate banks, 2 retail banks, and 1 housing finance company). Out of the rest, 4 stocks, one company from IT, construction and engineering, FMCG, and diversified conglomerate.
List of most common stocks in mutual funds
Below are the top 10 mutual fund companies
1. HDFC Bank
● HDFC Bank is a well-known mutual fund company name, and for good reasons. It has the highest allocation in total MF buying stocks portfolios with equity allocation.
● Around Rs.71,142.1 Cr is invested in HDFC bank by all mutual funds. So, if we consider the total AUM of Rs.10.31 Lakh Crore, HDFC bank alone is holding almost 6.9% of the total equity AUM of all the mutual funds. It shows the confidence all the mutual fund houses have for HDFC Bank.
● HDFC Bank is a Retail-oriented bank. It has given the profit growth of almost 20-25% y-o-u since the last 10 years, having a great consistency in profit growth numbers. For the same reason, HDFC Bank has enjoyed a premium valuation in the market.
2. ICICI Bank
● ICICI Bank is the second-highest stock in terms of allocation by mutual funds in their portfolios.
● Mutual funds have invested around Rs.59,465.4 Cr in ICICI Bank out of a total of Rs.10.31 Lakh Cr equity investment. Thus, ICICI Bank holds a 5.7% share in total equity mutual fund AUM.
● ICICI Bank is a corporate bank. The NPA pressure of corporate banks from the last 2-3 years is now fading down slowly. The profits of corporate banks are going to be promising in the coming quarters. With verified earnings, Earnings per share of corporate banks, and overall Sensex and Nifty Indices can go up in the future. Thus, with these improved EPS numbers, You can rationalize the price-to-earnings ratio in time.
3. Infosys Ltd.
- Infosys is the only IT stock in one of the top 3 mutual funds in India.
- It might be because of the higher percentage of promoter holdings (72.05%) in the case of TCS. The free-float market capitalization of TCS is minimal. As a result, there is minimal scope for domestic institutional investors (DIIs) like mutual funds to buy the stock (TCS) and include it in their portfolios.
- On the other hand, in the case of Infosys, promoter holding is only 13.15%. So there is the perfect scope for mutual funds to buy the healthy growth delivering IT stocks like Infosys. The total investment in Infosys is almost Rs.44,960 Cr with a 4.3% allocation in total equity-oriented funds AUM.
4. Reliance Industries Ltd.
● Reliance Industries Ltd (RIL) is a diversified conglomerate company. Equity mutual funds have a consistent allocation in RIL.
● In the last 2-3 years, allocations in RIL have seen a decent growth with the current holding of Rs.40,312.3 Cr by equity-oriented funds. This allocation in RIL contributes around 3.9% of the total AUM.
● Reliance Industries stock is trading at a PE 19.31 higher than its 3 years, 5 years, 10 years average PE ratio. With the improved earnings visibility from Reliance Jio and Reliance Retail, RIL is enjoying a premium valuation. Jio and Retail businesses are going fast, and both can come with IPOs in the coming years.
● So, due to the very high free float of RIL and higher earnings visibility in the future by the stock, equity funds are buying RIL and trying to increase the allocation of the stock in their portfolios.
5. Larsen & Toubro Ltd.
● L&T is a construction and engineering conglomerate player. Mutual funds are invested around Rs.33,281.3 Cr in L&T stock. While the % allocation of L&T is around 3.2% of the entire equity AUM.
● L&T is an outstanding stock in terms of corporate governance, consolidated businesses growth(Financial Services, IT). L&T has been delivering consistent growth in its profits over the years. And therefore, it can be a good bet for the investors to hold the stock for their long-term portfolios.
The above-mentioned stocks are the top 5 mutual funds in India. So, if you’re looking for the top 5 mutual funds to invest in, go for the aforementioned ones.
State Bank of India
● SBI is the biggest bank of India not by market capitalization but from a business point of view in terms of credit/loans given in the market. The investment in SBI is around Rs.33,066.2 Cr with a 3.2% allocation in the stock out of total equity exposure by mutual funds.
● Like ICICI Bank, SBI is one of the corporate banks with high earnings visibility. With the decrease in the provisioning (kept aside for NPAs from operating profits earlier), the bank’s profitability is increasing and will improve even more in coming quarters. So, we can say that SBI is coming out and relieving from NPA pressure slowly.
● The current profitability of all corporate banks, which is around Rs.4,000 Cr, will grow to almost Rs.80,000 Cr by FY2020-21. So, we can get the growth trend for the stock in the future, and this is the
7. HDFC Ltd.
● HDFC Ltd. focuses on the housing demand in the ‘Affordable Housing’ segment. It has a great opportunity in housing finance after the merger of Gruh Finance and Bandhan Bank.
● The company has a consistent growth potential to deliver profit growth in the coming years. So, Domestic Institutional Investors like mutual funds are very positive about HDFC Ltd. The current holding in HDFC Ltd is around Rs.31,521.9 Cr, with an almost 3% allocation in the total equity AUM of mutual funds.
8. Axis Bank
- Axis Bank comes under the corporate bank segment. Equity-oriented mutual funds have invested around Rs.30,326.5 Cr in Axis Bank. The stock has a 2.9% allocation in the entire equity AUM of mutual funds.
- Just like other corporate banks ICICI Bank and SBI Bank, the earnings visibility of Axis Bank is improving shortly due to the reduced NPA pressure. And in the revival phase of corporate banks, we believe Axis bank is running ahead of ICICI Bank and SBI Bank. So it is a perfect opportunity for mutual fund houses.
9. ITC Ltd.
● ITC Ltd is an FMCG conglomerate company. The current holding of ITC Ltd is almost Rs.28,105.7 Cr, with the % allocation of 2.7% by the mutual funds of equity orientation.
● The major contributors are the Index funds and Index ETFs in this allocation of 2.7% for the stock. Because of the high free float of the stock, the Index funds and Index ETFs must have the allocation for ITC Ltd. Moreover, ITC Ltd has a good weightage in the Sensex and Nifty indices, which is beneficial for the stock to increase its holdings by the index funds.
10. Kotak Mahindra Bank
- Kotak Mahindra Bank is one of the best banks in retail banking. It is a well-managed bank with a great vision for future growth.
- Mutual funds have invested around Rs.59,465.4 Cr in Kotak Mahindra Bank. Thus, the bank holds a 2.3% share in the total Asset Under Management (AUM) of equity-oriented mutual funds. And this allocation has seen consistent growth by the mutual funds.
- As we all know, the promoters must reduce their holding as per the RBI’s regulations. So in this scenario, DIIs like mutual funds are very positive to increase their holding in Kotak bank once the free float is available in the market.
These were the list of the top 10 mutual funds in India. However, Invest Yadnya recommends doing an in-depth analysis of any stock before making investments