Reliance Industries (RIL) and Bharti Airtel seem to be the two hottest favourites of open-ended mutual fund (MF) schemes in the country.For seven months in a row, the two have managed to stay as No.1 and 2 slots in investmentterms. RIL was No. 1 in April, September and October 2009, while Bharti Airtel enjoyed a stranglehold on that slot between May and August.
The No.3 slot has largely been dominated by either of the two banks, State Bank of India (SBI) and ICICI Bank, except in August 2009, when another public sector giant Oil & Natural Gas Corporation (ONGC) dislodged both to force its way into the top three.
Still, since the beginning of this fiscal, the top four slots in terms of investment favourites have always been between Reliance, Bharti Airtel, SBI and ICICI. Why?
Mutual fund trackers and fund managers across board felt that the generally positive outlook on these stocks and their ready liquidity at all times are key factors why they are preferred over all others in most schemes.
Indeed, since April 2009, there has hardly been a change in the top 10 favourite slots with L&T, ITC, Infosys Technologies, Bharat Heavy Electricals, ONGC, HDFC Bank and the first four heavyweights topping the investment baskets of the country’s open-ended MF schemes.
A study conducted by Delhi-based MF tracker Value Research revealed that two other scrips rapidly gaining popularity are Tata Consultancy Services and Sterlite Industries. The former was the preferred No 10 for a large number of open-ended schemes in August, while the latter snatched the spot next month in September.
On the choice of stocks, ICICI Prudential Mutual Fund deputy managing director Nilesh Shah said since investment decisions were generally always long-term, “investing in the best-performing stocks helps generate good returns. We, as fund managers, take a call based on our view on the stock in terms of whether it is overweight and under-weight”.
“Fund managers tend to gravitate towards the same stocks in open-ended schemes where liquidity is of prime importance. While the top few stocks tend to be common, those lower down in the pecking order differentiate the performance of different MF schemes. All this apart, the fund manager’s trading skills and his execution capabilities are also factors that influence the return of a scheme,” said JPMorgan AMC executive chairman Krishnamurthy Vijayan.
Franklin Templeton senior portfolio manager-equity Sivasubramanian KN said: “Our approach has always been to construct a well-diversified portfolio of stocks with a long-term perspective. We follow a bottoms-up approach to stock selection, wherein we look to invest in fundamentally sound companies across sectors. Our belief is that there are stocks that need to be bought and sold regardless of the state of markets and the focus is on companies creating shareholders wealth.”
Elaborating further, Mr Sivasubramanian added: “The portfolio composition of a fund depends on its investment objective/style and our view regarding fundamentals of individual companies.
Typically, large-cap stocks can be found in funds that focus on bigger companies or invest across the market capitalisation range. Funds focusing on mid-and small-cap stocks or specific sectors or overseas securities are likely to have a different portfolio focus.”
Some like GAIL, NTPC, Housing Development Finance Corporation, Hindustan Unilever, Tata Steel, Bharat Petroleum Corporation, Reliance Communications, Reliance Infrastructure, Cairn India, Maruti Suzuki and Jai Prakash Associates have been juggling with each other to be in the top 25 preferred stock bracket during the period
under review.
A quick look at the portfolio of the various MF schemes indicate that information technology and construction segment (including cement industry) caught the fancy of fund managers during the April-October period, while they offloaded telecom and FMCG stocks, among other
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