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India’s biggest fund house buying bank, infra stocks; mounts contra bet in auto

The fund house bought more than 1 crore shares each of the country’s biggest lender by assets.

Updated: Oct 10, 2019, 04.12 PM IST
HDFC Asset Management, India’s largest mutual fund house by assets, went shopping for select PSU as well as private banks and infrastructure stocks in September when the benchmark BSE Sensex advanced nearly 4 per cent following a major corporate tax cut.

The fund house bought more than 1 crore shares each of the country’s biggest lender by assets, State Bank of India, and India's largest hydropower producer NHPC ahead of the September quarter earnings season that kicks off on October 10.

Shares of these PSUs have declined over 10 per cent since January, 2019.

Big bull Rakesh Jhunjhunwala earlier this week said he sees a good opportunity in the PSU stocks. In an interaction with ETNOW, he said, “There is a very good opportunity in PSU stocks across the board. The biggest beneficiary of the tax cut would be the PSU firms.”

HDFC Mutual Fund’s other top buys in September included Axis Bank, Coal India, ITC, Bharat Electronics, BPCL, HPCL, Ashoka Buildcon, Federal Bank, ICICI Bank, L&T, GAIL, Lupin, Aurobindo Pharma, Sun Pharma, Kirloskar Ferrous and eClerx Services, among others.

Bharat Petroleum’s (BPCL) share price has risen nearly 40 per cent since September after the government announced a plan to sell its 53 per cent stake in the company. Edelweiss Securities sees more upside in the stock given its material gap in valuations vis-à-vis top global refineries.

The brokerage recently came out with a ‘buy’ rating on BPCL with a revised price target of Rs 632 per share (earlier: Rs 442).

Reliance Securities is positive on the pharmaceutical sector and has advised investors to stay stock-specific.

Ace Mutual Fund database showed HDFC AMC held 5.44 crore shares of Axis Bank as of September 30 against 4.96 crore a month earlier. Likewise, it also bought over 10 lakh shares each in ICICI Bank and Federal Bank, indicating that the fund house has developed a liking for select private sector lenders.

Sunil Subramaniam, MD & CEO, Sundaram Mutual said NBFCs and public sector banks are going to be fairly less active and private sector banks would be a safe play as they have a healthy mix of retail and corporate books. “Year-on-year, their earnings should still show decent growth,” he said.

HDFC AMC also added shares of hotel firms Chalet Hotels (9 lakh shares) and Indian Hotels (5 lakh shares). Besides, it bought Mishra Dhatu Nigam (9.49 lakh shares), JSW Steel (9.06 lakh shares), ONGC (8.17 lakh shares), Neyveli Lignite (8 lakh shares), REC (7.46 lakh shares), Greenply Industries (7.30 lakh shares) and Aster DM Healthcare (7.18 lakh shares), Garden Reach (6.94 lakh shares) and HDFC (6.82 lakh shares).

The fund house appeared to have found a contra bet in auto stocks, as the sector continued to reel under pressure due to weak demand for more than a year now. The fund house added some shares of Tata Motors (16,892 shares), Hero MotoCorp (27,933), M&M (21,358) and Maruti Suzuki (1,561), but sold 15,302 shares of Bajaj Auto during the month.

Maruti Suzuki cut production by 17.48 per cent in September, making it the eighth straight month of lower output.

From among major blue chip firms, the fund house added 4 lakh shares of the oil-to-telecom behemoth Reliance Industries (RIL) and 3.71 lakh shares of HDFC Bank. IT companies Tech Mahindra, Sonata Software, NIIT Technologies and Tata Consultancy Services also drew interest of the AMC.

JM Financial has a ‘buy’ rating on RIL with an immediate target price of Rs 1,346 and thereafter Rs 1,365.

Overall, the fund house increased stakes in as many as 98 companies and offloaded shares in 53 others from across sectors. With an asset under management of Rs 3.46 lakh crore, it held 308 stocks as of September 30, 2019.

Among the stocks the fund house offloaded during the month included over 10 lakh shares each in Infosys, Edelweiss Financial, YES Bank, Ashok Leyland, BHEL, S Chand, Shriram Transport, Rites and Tata Chemicals.

It also sold over 1 lakh shares of select midcap and largecap firms such as Divi’s Lab, Dabur India, Titan, Cipla, Wipro, Adani Ports and Petronet LNG, among others.

Titan shares declined as much as 6 per cent in intraday trade on October 9 after the company reported a 2 per cent decline in jewellery business revenue for September quarter of 2019-20 despite a 7 per cent growth in retail sales.

“Retail sales (secondary sales) grew 7 per cent in Q2 FY20 but revenues declined 2 per cent year-on-year in Q2FY220, due to the adverse impact of hedges matured during the quarter,” the company said in a BSE filing.

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