Never miss a great news story!
Get instant notifications from Economic Times
AllowNot now

You can switch off notifications anytime using browser settings.
The Economic Times

Midcap stocks mutual funds lapped up in Oct in their chase for big returns

NEW DELHI: Dalal Street’s focus shifted to midcaps in October as the upside got capped in largecaps. In their hunt for alpha, domestic money managers pushed up shares of infrastructure firms and capex-driven midcap businesses all through October even as they offloaded some bank and financial services stocks from this space.

Stocks like Godrej Industries, Motilal Oswal Financial Services (MOFSL), 3M India, Escorts, Federal Bank, Jindal Steel and Power (JSPL), Adani Enterprises, Godrej Properties, Tata Power and NBCC were some of the midcap stocks that were in demand among domestic fund managers during the month, said a report by ICICIdirect.

At the end of October, these fund houses collectively held Godrej Industries’ shares worth Rs 53 crore, four times of what they held in September. Similarly, they held Rs 196 crore worth of shares in MOFSL, shares worth Rs 1,825 crore worth of Tata Power, shares worth Rs 903 crore of JSPL, shares worth Rs 344 crore in NBCC and shares worth Rs 977 crore of 3M India.

JSPL is a stock domestic brokerages too have been talking about. Antique Stock Broking has a price target of Rs 173 on it, meaning a potential 15 per cent upside. The brokerage also sees 15 per cent upside in NBCC (target: Rs 45), 32 per cent upside in Federal Bank (target: Rs 110) and 12 per cent upside in Escorts with a target price of Rs 755.

While midcaps may have eroded wealth on a year-to-date basis, they have seen some bounce in recent months. BSE Midcap gained 5.4 per cent in October. Analyst see the segment outperforming going forward.

“With the correction in broader market, the Nifty Midcap index is now trading at a healthy discount to the headline Nifty index (from a forward P/E valuation perspective), compared with the steep premium that it had quoted at the end of year 2017. We are now seeing some attractive bottom-up opportunities in the midcap segment. With recovery in corporate earnings and capex cycle, we also expect the broader market to recover,” said Sampath Reddy, Chief Investment Officer, Bajaj Allianz Life Insurance.

Midcap funds saw a net inflow of Rs 1,091 crore in October on the back of strong SIP flow, according to AMFI data. However, it was less than Rs 1,276.66 crore that had flowed in through September. Overall, mutual funds drew Rs 8,245.62 crore through SIPs in October, around Rs 17 crore less than what they had collected in September.

Domestic Institutional Investors (DIIs), which also include mutual fund houses, bought shares worth a net of Rs 4,675.37 crore in the equity market in October.

Domestic money managers sold bank and financials-related stocks in October. Their holding in RBL Bank came down to Rs 2,467 crore in October from Rs 2,926 crore in September. The market value of mutual fund holdings in Shriram Transport Finance Company came down to Rs 1,021 crore from Rs 1,034 crore, according to the ICICIdirect report. CRISIL, PNB Housing Finance and Edelweiss Financial Services were other financials stocks that topped the selling list of AMCs in October.

Among other stocks that saw selling by AMCs included GMR Infra, Adani Power, Castrol India, Sterlite Technologies and Glenmark Pharma.

In the smallcap space, Bajaj Consumer Care, J Kumar Infra, Fortis Healthcare, PVR and Can Fin Homes witnessed highest buying in October while Asahi India Glass, Zensar Technologies, Rites, Ircon International and South Indian Bank were among the stocks that saw most selling, ICICIdirect noted.
Stay on top of business news with The Economic Times App. Download it Now!