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India’s second biggest fund house busy lapping up stocks that are down 45-72%

ICICI Prudential Asset Management, the country’s second-largest money manager by assets, was busy all through April lapping up beaten down stocks, when the BSE benchmark Sensex advanced around 1 per cent.

The fund house increased exposure to select stocks such as Vodafone Idea, Lakshmi Vilas Bank, Avanti Feeds, Bharat Electronics and NBCC, that have plunged 45-72 per cent since January 2018.

S Naren, ED and CIO, ICICI Prudential AMC said, “The market currently is fairly priced. The strategy in such market condition is to adopt a stock-specific approach. There are several pockets of opportunities across sectors and market capitalisations, where scrips are available at attractive valuations.”

Power, auto ancillaries, metal and telecom looks attractive to Naren.

Vodafone Idea recently concluded a Rs 25,000 crore rights issue, which was oversubscribed nearly 1.08 times. Ace Mutual Fund data base showed ICICI Prudential was holding 46 crore Vodafone Idea shares as of April 30 against 8.77 crore a month earlier, hinting that the fund house subscribed to the rights issue.

Table 1 ICICI Prudential increased stake

Besides, the fund house bought additional shares of IT majors Infosys (1.30 crore) and Tata Consultancy Services (4 lakh). Infosys last month posted a 10.5 per cent rise in consolidated profit for March quarter at Rs 4,078 crore, and gave a guidance for 7.5-9.5 per cent revenue growth in FY 2019-20.

TCS reported 17.7 per cent year-on-year growth in March quarter net income at Rs 8,126 crore and Rs 6,904 crore profit. The IT major last Friday once again became India’s most valued firm by market valuation, surpassing Reliance Industries.

Brokerage Prabhudas Lilladher has an ‘accumulate’ rating on Infosys with a price target of Rs 782 and a ‘buy’ call on TCS with a price target of Rs 2,312.

ICICI Prudential AMC also added shares of auto players Eicher Motors (5,484 shares), TVS Motor (13 lakh) and Mahindra & Mahindra (4.15 lakh). Financial majors Kotak Mahindra Bank and HDFC Bank also manage to draw the fund house.

In the power sector, ICICI Prudential purchased additional 2.83 crore shares of NTPC, followed by Power Finance Corporation (40 lakh), REC (36 lakh) and Adani Power (1.34 lakh). Antique Stock Broking has ‘buy’ rating on NTPC with a price target of Rs 161.

“With improvement in commissioning and commercialisation, NTPC should see an uptick in operational performance. Further, capacity addition in the next five years will sustain the momentum. We foresee 5-6 per cent capacity addition CAGR,” the brokerage said.

The fund manager also bought auto ancillary shares like Apollo Tyre, Exide Batteries, Motherson Sumi Systems and Amara Raja Batteries.

“I will be a little contrarian on auto and auto ancillaries at this point. Although lead indicators suggest a bit of consumption slowdown, two-wheelers should start looking better. I would probably be a buyer on dips starting with two-wheelers and also in some of the auto components and auto ancillaries. There has been a reasonable price correction because of the overall slowdown,” Gurmeet Chadha, Co-founder, Complete Circle Consultants, told ETNOW.

Overall, the fund house increased stakes in as many as 111 companies, and sold in 116 across sectors. The fund house held 552 stocks as of April 30.

Yes Bank, Axis Bank, Rain Industries, Coal India, ONGC, Bharti Airtel, Federal Bank, SBI, ITC, Suzlon Energy, SpiceJet, ICICI Prudential, Wipro, HDFC, Power Grid, Bank of Baroda, Ambuja Cement, Axis Bank and Zee Entertainment were among the stocks the fund house offloaded during the month.

Zee Entertainment shares declined nearly 10 per cent last week amid concerns over stake sale by its promoters.

Table 2 ICICI Prudential reduced stake in April

Total asset under management (AUM) of ICICI Prudential AMC stood at Rs 3.30 lakh crore as of April 30, 2019. It was followed by SBI Funds Management (Rs 2.97 lakh crore) and Aditya Birla Sun Life AMC (Rs 2.50 lakh crore) in terms of AUM. HDFC Asset Management stood market leader with total AUM of Rs 3.47 lakh crore.
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