Money going to largecap, larger midcap & multicap funds: Kaustubh Belapurkar, Morningstar
Larger names like TCS, ITC have not seen significant or marginal additions.
What has been the buying trends with some of the largecap funds?
We saw a fair bit of buying in July but half of that has actually from the CPSE ETF -- those four-five large PSU names that we saw -- almost Rs 11,000 crore of purchases that happened. Beyond that, nothing has changed materially. The corporate banks still rule the roost. Axis, ICICI are still leading the charge on what managers are buying.
Beyond that, we have not really seen too much sizable buying activity. The good part is that we have not seen too much selling either on the large caps or the midcaps which is probably a little bit of hearten in saying and I tie that back to the flows which have come in from domestic investors. They have probably gone up a tad which is great because you have seen the markets come down quite sharply. We have not seen outflows which is great.
Let us break it up and let us talk about the one high flier which has held the Nifty of late and that is Reliance Industries. What are the flows that you have seen in the last three trading sessions post the AGM last weekend, given that the stock has moved almost 10-12% ?
I want to have a pulse of the flows what has happened this month but increasingly what has been happening is that over the last 18 months, you have seen incremental additions to Reliance month on month.
We saw about Rs 1,000 crore of purchases in Reliance last month. I would not be surprised if the momentum around that continues because obviously they are making the right noises. Managers had this large part of the rally when they were underweight Reliance and now a lot of them have added significant positions over the last year or so.
In the broader markets, are you looking at adding positions anywhere given the state of things right now? What is the trend looking like when it comes to midcaps and small caps?
It has become a little bit of stock-pickers’ markets and for a while a large part of the money is going towards those largish cap names and that is also a derivation of because money is also going to larger midcap, multicap funds. There is some sprinkling of money coming into some of the smallcap, midcap funds but it is not that sizable. It is becoming very stock specific even on the largecap counters. It has been quite a polarised market and money has gone to Reliance. Obviously the corporate banks, HDFC Bank continues to see some flows along with the Axis and ICICIs of the world. May be some sprinkling of money has come into technology but it is nothing sizable to kind of move the needle significantly.
Would you say that the fear quotient or the cautiousness quotient is significantly higher when it comes to broader markets?
Absolutely, I would think so and that is the trend that we have been seeing during the course of the year. But it has become even more significant over the last two to three months because FIIs have been pulling out a lot of money. Markets have been going through challenging times not just because of flows; there is much negativity with the NBFC sector as such and the way it has been impacting even the auto sector. In fact, that is the other thing that we have started seeing may be marginally.
You said that last time also …
Yes, that is right and that kind of continues. Maruti continues to see some trickle of flows. Earlier in the year, there was a lot of selling in Maruti. It is not sizable but I would look at that as levels have come to a point where I do not want to add some positions.
Besides Maruti and Reliance, where else are you are seeing inflows amongst large cap?
A couple of pharma names actually and this is something we spoke about. We saw that last month too and Dr Reddy, Sun continue to see some flows which is quite surprising.
Is it stock specific again?
I would definitely say so and again I think just given the way some of these stocks have been hammered, you start looking at from the perspective that okay it cannot get much worse than this and you want to get into some of these counters. I would say the two names that I mentioned; Reddy’s and Sun are the ones which are getting reasonable amount of flows, but even Cipla or a Divi’s is seeing some flows. It is not just restricted to a couple of counters. I would say quite a few counters are getting flows.
Among the largecaps as well, there are a lot of PSU names like NTPC, ONGC, Coal India. Is that some sort of a trend that you see continuing with flows in PSUs?
This is just one off-ish because of the CPSE buying that happened. But we also saw not just the CPSE but also addition from some of the regular diversified equity funds buying. It was largely related to this and when the government comes and does this disinvestment, you will see these numbers or names prop up. NTPC is probably one of the few counters that has been seeing flows even beyond the CPSE but I think the others are largely driven by CPSE.
From the broader end of the market, can you highlight some of the top sells and what have been the stocks that have been retained in the portfolio?
I would say some of the sells have not been significant and what we have seen is not very significant. We saw some profit booking in the likes of an Infy or an SBI given that they did make sort of lifetime highs in the month of July but it is just very marginal trimming of positions.
The other one where we have seen some selling out in the midcap counters, is MindTree which had an open offer going and then the management was being replaced. There is so much negative noise around that. We will see how things settle. Investors did get out of it. Some of the NBFC midcap counters like Shriram Transport Finance, Sundaram Finance also saw money being taken off the table.
Which are the stocks that have been retained from the broader end of the market?
Larger names like TCS, ITC have not seen significant or marginal additions. These are some of the names, including some of the other banks that I already spoke about. The HDFC twins continue to retain sizable positions.
The other interesting theme that we have seen is that we have been talking about ICICI being added. It is the second largest holding that funds hold right now. HDFC used to be leaps and bounds ahead in terms of the favourite stock on the counter. ICICI is almost there in terms of overall exposure. I would not be surprised if ICICI is potentially the largest holding in the near future.