Most Favourite Stocks of Mutual Funds in Top 5 Sectors

Most Favourite Stocks of Mutual Funds

Most Favourite Stocks of Mutual Funds in Top 5 Sectors

Super Favourite Stocks of Mutual Funds With Highest Allocation in Top 5 Sectors

Introduction

In this article, we are going to see the 5 most favourite stocks of mutual funds in top 5 sectors and having highest allocation in their respective sectors.

Mutual Fund Detailed Review by Invest Yadnya
Mutual Fund Detailed Review by Invest Yadnya

Most Favourite Stocks of Mutual Funds in Top 5 Sectors

Thus, Mutual Funds have 1 super favourite stock in major sectors which they hold in large quantities. Which are those stocks?

Most Favourite Stocks of Mutual Funds in Top 5 Sectors
Most Favourite Stocks of Mutual Funds in Top 5 Sectors

1. HDFC Bank Ltd

  • For October 2019, HDFC Bank is having 20% allocation in financial sector. It means if mutual funds have invested Rs.100 in entire financial sector, then HDFC Bank allocation is almost Rs.20.
  • Mutual funds are having around Rs.4 Lakh Crore investments in financial services sector. Thus, close to Rs.80,000 Cr allocation is done in HDFC Bank Ltd. It indicates how much trust is built by HDFC bank stock across mutual funds.
  • On account of high weightage in Index, Passive funds like Nifty as well as Sensex ETFs are mandatory to invest in the stock. In addition, in active funds also, fund managers are quite confident about the future earnings potential of the bank.
  • If we do year on year comparison, HDFC Bank was having allocation of almost 18.6% in financial sector. It shows the Mutual funds’ interest grew YoY, so increased the allocation for the bank.
  • Detailed analysis of HDFC Bank Ltd is available for our stock subscribers on our website.

2. Infosys Ltd

  • If mutual funds are having Rs.100 investments in technology sector, then alone Infosys allocation is almost Rs.43.5. Infosys is having 20% allocation in technology sector for October 2019, while it was 44.2% last year October 2018.
  • How can it be possible, if TCS is enjoying the valuation more than two times that of Infosys?
    • The reason behind such a big allocation of Infosys is the free-float market cap available for the non promoters. Infosys have very less promoter’s holding 13.15% as on September quarter 2019. If current market cap of Infosys is Rs.3 Lakh Cr, then its promoters are holding merely around Rs.40,000 Cr. While the remaining Rs.2.60 Lakh Cr is free-float market cap for Infosys. In such case, it gives mutual funds more stake to buy the stock.
    • On the other hand, TCS has promoter holding of 72.05%. Though market cap of TCS is around Rs.7.8 Lakh Cr, its promoter’s stake is around Rs.5.6 Lakh Cr. While, the left Rs.2.2 Lakh Cr is available as free-float.
  • Thus, in current scenario, it gives mutual funds very less scope to invest in TCS on account of very high promoters holding as compared to Infosys. It makes the allocation of TCS in technology sector relatively very less than of Infosys.

3. Reliance Industries Ltd

  • For October 2019, Reliance Industries Ltd (RIL) is having 32.9% allocation in energy sector. It means if mutual funds have invested Rs.100 in the Energy sector as a whole, then Reliance Industries allocation is almost Rs.32.9.
  • The % allocation of RIL is increased from 27.3% last year in October 2018 to 32.9% in October 2019. Mutual funds are currently having around Rs.48,000 Cr allocation in RIL.
  • Today also, the conglomerate – RIL is taken in Energy sector. As far as revenue as well as profits are considered, Oil and Gas are still the major contributors. But, the long term earnings growth is not there in Oil and Gas segments. So, mutual funds are currently making allocations in RIL on account of a great earnings visibility as well as growth potential in Reliance’s Retail and Jio businesses.
  • However, in near future, if Reliance Retail and Reliance Jio get listed, then the % allocation of RIL in Energy sector will decrease. And separate allocations will be made for Retail and Jio in their respective sectors.

4. Larsen & Toubro Ltd

  • In the construction related business, Larsen & Toubro Ltd (L&T) is the most favourite stock of mutual funds. If mutual funds are having Rs.100 investments in construction sector, then L&T’s allocation is almost Rs.43.8.
  • The single stock – L&T is having 43.8% allocation in construction sector for October 2019, while it was 40.9% last year October 2018.
  • In last 1 year, the % stake of mutual funds in L&T shareholding has increased from 14.87% in Sept-2018 to 18.41% in Sept-2019.
  • The company is having a consistently growing revenue quarter on quarter with a steady operating profit margin (around 16-18%). Around 90% revenue of L&T comes from construction and project related activity.
  • L&T has bagged many large orders across various business segments like Residential and related Infrastructure related projects (like CIDCO under Pradhan Mantri Awas Yojana, Mumbai Trans Harbour Link), Defence segment projects and other various projects in domestic as well as international market.
  • It will add a great value to the earnings growth of L&T, which may be the reason for 43.8% allocation of L&T in Construction sector.

5. ITC Ltd

  • For October 2019, ITC Ltd is having 34.3% allocation in FMCG sector. It means if mutual funds have invested Rs.100 in the FMCG sector, then ITC’s allocation is almost Rs.34.3.
  • The % allocation of ITC is decreased from 40.1% last year in October 2018 to 34.3% in October 2019. Mutual funds are currently having Rs.30,500 Cr allocation in ITC Ltd.
  • Such a high % allocation of a single FMCG stock (ITC Ltd) is due to the greater availability of free float market cap of ITC (Rs.3.04 Lakh Cr) as compared to its peer FMCG companies :
    1. Hindustan Unilever Ltd (Rs.1.45 Lakh Cr)
    2. Nestle India (Rs.50,000 Cr)
    3. Britannia Industries (Rs.36,000 Cr)
    4. Godrej Consumer Products (Rs.27,000 Cr)
    5. Marico (Rs.18,400 Cr)

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