India Fund Portfolio Scanner

Transcription

1 India Fund Portfolio Scanner Quarter Ended Sept Sameer Hassija Senior Investment Analyst, Morningstar India - 1 -

2 About The Report The Morningstar India Fund Portfolio Scanner report analyses holdings of mutual fund portfolios and highlights key trends observed during the July-September quarter. Equity funds We look at portfolio metrics like popular stocks/ sectors, what s in what s out analysis, sectors/ stocks gaining or losing traction, most bought/ sold stocks, market cap equity exposure of funds, and cash holding. We only consider three Morningstar equity categories India OE Large-cap, India OE Small/Mid-cap, India OE ELSS (OE being open-end funds). Since our focus is diversified equity funds, we are only considering these three categories since they constitute most of the overall equity assets of the Indian fund industry. Debt funds We look at portfolio metrics like average maturity, credit quality and deployment by debt funds into different types of debt and money market instruments. Here we consider six Morningstar fixed income categories India OE Ultrashort Bond, India OE Short-Term Bond, India OE Short-Term Government Bond, India OE Intermediate Bond, India OE Intermediate Government Bond & India OE Long-Term Government Bond. As regards the sector classification, we use Morningstar sectors. To know more about the Morningstar sectors, click here. All data in this report is sourced from the Morningstar database, unless otherwise mentioned

3 Key Takeaways Equity mutual funds increased exposure towards all sectors. Increase in sector exposure was assisted by a surge in stock prices and augmented equity flows. The September quarter witnessed an interesting trend reversal. Sectors like consumer defensives and healthcare, which saw a drop in exposure over last 2 quarters, seem to be back in favour. Consumer cyclicals piped out industrials to become the second most popular sector in equity funds portfolios. Increasing revenues of retail companies, auto and auto part manufacturers, and hospitality companies, due to increasing demand and with the ensuing festive season, has resulted in bid upon by the mutual funds in the sector. Banking stocks continue to remain frontrunners in the list of most popular stocks. Fund managers continue to bet on the top 3 banking stocks by market capitalisation. Automobile stocks likes of Maruti Suzuki and Tata motors witnessed an increase in exposure in terms of market value of stocks held by equity funds. Fund managers have bought auto stocks due to an increased demand for passenger and commercial vehicles. The festive season also helped propel sales of these companies. IT giants Infosys, TCS and HCL Technologies, which had lost fund managers interest for a few quarters, now seems to have gained favour again. Telecom biggie Bharti Airtel, after featuring twice in the most sold share list, appeared in the most bought one. Interestingly, during the quarter funds sold a few banking stocks but simultaneously seemed very bullish on HDFC Bank, Federal Bank & United Bank of India. Infrastructure financing giant IDFC Ltd. witnessed a constant buying interest over the last 6 months. The market value of shares held by mutual funds increased manifold to Rs 1,317 crores by September from Rs 113 crores as of April. Equity mutual funds have slightly increased cash levels this quarter. Debt fund managers increased the average maturity across all duration products

4 Most Popular Sectors Morningstar Sector % Change in Market value Sector Exposure Sep (%) Sector Exposure Jun (%) No. of funds in the sector - No. of funds in the sector - Financial Services 57,980 55, Consumer Cyclical 38,041 30, Industrials 33,808 31, Technology 31,217 25, Basic Materials 21,607 19, Energy 17,648 16, Healthcare 16,748 13, Consumer Defensive 11,054 9, Utilities 7,998 7, Communication Services 5,172 3, Real Estate 1,186 1, Sector Exposure Trend Morningstar Equity Sector Allocation 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% Mar-14 Apr-14 May-14 Jun-14 Jul-14 Aug-14 Sep-14 Real Estate Communication Services Utilities Consumer Defensive Healthcare Energy Basic Materials Technology Industrials Consumer Cyclical Financial Services Morningstar Sector Sector Exposure (%) Mar-14 Apr-14 May-14 Jun-14 Jul-14 Aug-14 Sep-14 Financial Services Consumer Cyclical Industrials Technology Basic Materials Energy Healthcare Consumer Defensive Utilities Communication Services Real Estate Equity mutual funds increased exposure towards all sectors (except real estate) in terms of market value. Increase in sector exposure was assisted by the surge in stock prices and augmented equity flows witnessed during this quarter. The quarter witnessed an interesting trend reversal with defensive sectors gaining fund manager s interest. Sectors like consumer defensives and healthcare, which saw a drop in exposure over the last 2 quarters, seem to be back in favour. Fund managers seem to be rebalancing their portfolios by decreasing exposure towards certain overbought sectors like financial services, industrials, basic materials and energy, and increasing exposure towards defensives

5 Financial Services continued to be the most owned sector in the portfolios of equity funds. Though the sector witnessed a drop in exposure in percentage terms compared to last quarter, equity funds did increase exposure in terms of market value. Exposure to financial services decreased from 25.9% in June to 23.9% in September. Consumer Cyclical piped out industrial to become the second most popularly held sector in equity funds portfolios. This sector has witnessed a continuous increase in exposure over last 6 months. This quarter the allocation to the consumer cyclical sector stands at 15.7% compared to 14.2% in previous quarter. Increasing revenues of retail companies, auto and auto part manufacturers, and hospitality companies, due to increasing demand and with the ensuing festive season, has resulted in bid upon by the mutual funds. Technology saw an increased exposure. Exposure increased from 12.0% at the start of the quarter to 12.9% by the end. Though the Indian rupee continued to trade at a steady level throughout the quarter, exposure to this sector would have increased on the back of robust economic indicators from U.S. (one of biggest outsourcing market for Indian infotech companies). Overall, the mutual fund portfolios saw quite a bit change in their sector exposures during the quarter. Real Estate continues to be the least favoured sector

6 Most Popular Stocks Company No. of funds in the stock - Sep No. of funds in the stock - Jun No. of Shares - (Fig. in Lakhs) No. of Shares - (Fig. in Lakhs) ICICI Bank Ltd 10,853 11, HDFC Bank Ltd 9,110 7, , Infosys Ltd 8,643 7, State Bank of India 7,559 7, Larsen & Toubro Ltd 6,588 7, Maruti Suzuki India Ltd 5,149 3, Reliance Industries Ltd 5,024 5, Tata Consultancy Services Ltd 4,205 4, ITC Ltd 3,693 3, ,137 Oil & Natural Gas Corp Ltd 3,678 3, Bharat Petroleum Corp Ltd 3,580 3, Axis Bank Ltd 3,450 3, Bharti Airtel Ltd 3,450 2, Wipro Ltd 3,420 2, Tata Motors Ltd Class A 3,001 2, Tech Mahindra Ltd 2,939 2, HCL Technologies Ltd 2,826 2, Housing Development Finance Corp Ltd 2,682 2, Divi''s Laboratories Ltd 2,545 1, Bank of Baroda 2,084 2, Banking stocks continue to remain frontrunners in the list of most popular stocks. Out of the top 5 popularly held stocks in fund portfolios, 3 are from the banking sector. Fund managers continue to bet on the top 3 banking stocks by market capitalisation. ICICI Bank continues to feature as the most popular stock in mutual fund portfolios. The stock, however, has witnessed a drop in exposure in terms of market value as equity funds have sold the stock in sizeable quantity. Larsen & Toubro Ltd which gained favour as the second most popular stock in the last quarter has dropped to fifth place for the quarter ended September. Fund managers seem to have booked profits by selling a sizeable quantity of the stock, as the price had increased quite a bit over last 2 quarters. Market value of shares held by mutual funds dropped by Rs 1,400 crores for the quarter ended September. Automobile stocks such as Maruti Suzuki and Tata Motors witnessed an increase in exposure in terms of market value of stocks held by equity funds. Fund managers have bought auto stocks due to the increased demand for passenger and commercial vehicles. The festive season helped propel sales of these companies. The market value of shares held by mutual funds increased by Rs 1,200 crores and Rs 350 crores, respectively, over this quarter

7 IT giants Infosys, TCS and HCL Technologies, which had lost fund managers interest for few quarters, has gained favour again. Improving health of the U.S. economy had a positive impact on these companies which in turn has helped stock prices to increase. Increased exposure in terms of market value held by stocks was a result of increase in stock prices. Telecom giant Bharti Airtel which has featured in the list of most sold stocks in the last 2 quarters has witnessed buying interest by fund managers during this quarter. The stock price rose by more than 20% during the quarter, and at the same time the total number of shares held in portfolios of equity funds increased from 6.5 crores to 8.5 crores at the end of this quarter. Most Bought/ Sold Stocks Most bought stocks Company No. of Shares - No. of Shares - No. of Shares purchased No. of funds in the stock - No. of funds in the stock - Gammon Infrastructure Projects Ltd 119,736 25,689 94, IDFC Ltd 95,983 25,238 70, , Ashok Leyland 80,038 35,914 44, GMR Infrastructure Ltd 33,676 6,512 27, Bharti Airtel Ltd 85,290 65,364 19, ,450 2,202 Petronet LNG Ltd 42,134 22,805 19, Indian Hotels Co Ltd 44,750 26,385 18, Crompton Greaves Ltd 97,073 78,850 18, ,952 1,583 Wipro Ltd 57,314 44,998 12, ,420 2,458 Gammon India Ltd 15,464 3,820 11, Power Grid Corp Of India Ltd 137, ,638 11, ,866 1,763 HDFC Bank Ltd 104,438 93,149 11, ,110 7,652 Federal Bank Ltd 162, ,506 10, ,039 2,026 Bharat Heavy Electricals Ltd 19,357 9,165 10, Gujarat State Petronet Ltd 80,507 70,409 10, NCC Ltd 26,453 16,616 9, United Bank of India 10, , Tata Motors Ltd 37,652 28,714 8, ,891 1,238 Jagran Prakashan Ltd 33,703 24,978 8,

8 Most sold stocks Company No. of Shares - No. of Shares - No. of Shares sold No. of funds in the stock - Sep No. of funds in the stock - Jun Jaiprakash Power Ventures Ltd 72,396 98,115-25, ITC Ltd 99, ,671-13, ,693 3,695 Sesa Sterlite Ltd 37,590 50,209-12, ,024 1,468 GVK Power & Infrastructure Ltd 19,460 31,636-12, Motherson Sumi Systems Ltd 37,443 47,946-10, ,480 1,555 South Indian Bank Ltd 14,653 24,649-9, Shanghai Prime Machinery Co Ltd H Shares 5,000 14,955-9, Adani Ports & Special Economic Zone Ltd 24,845 34,251-9, Gujarat State Fertilizers & Chemicals Ltd 20,897 30,178-9, Power Finance Corp Ltd 23,629 32,655-9, ,003 TV18 Broadcast Ltd 9,272 18,168-8, Texmaco Rail & Engineering Ltd 24,869 32,387-7, Allahabad Bank 16,916 24,218-7, Hindalco Industries Ltd 14,675 21,376-6, TVS Motor Co Ltd 37,638 44,023-6, Infrastructure companies Gammon Infrastructure Projects and GMR Infrastructure featured as the most bought stocks during the quarter. Equity fund managers purchased a sizeable quantity of shares of these companies. Not only did existing funds accumulate their shares, but new funds too picked up the stock. Telecom biggie Bharti Airtel, after featuring twice in the most sold share list, appeared in the most bought one. Equity fund managers purchased around 2.0 crore shares during the quarter. Market value of shares held by mutual funds increased by Rs 1,250 crores during the quarter ended September. Well known commercial vehicle manufacturing companies Ashok Leyland and Tata Motors witnessed sizeable accumulation by mutual funds throughout the quarter. Quite a number of new funds too took exposure to these stocks. It is interesting to note that though they sold a few banking stocks, they seemed very bullish on HDFC bank, Federal bank and United Bank of India. Power companies saw a mixed trend with companies like Power Grid Corporation of India witnessing increased buying interest. However, on the other end, power production companies like GVK Power & Infrastructure and Jaiprakash Power Ventures witnessed a sell-off. In fact, Jaiprakash Power Ventures featured at the top of the list of most-sold companies. Number of shares held by mutual funds dropped from 9.8 crore in beginning of the quarter to 7.2 crore by end of September

9 ITC Ltd continued to witness selling thanks to various negative developments such as the buzz about a hike in tax on cigarettes in the Budget. Fund managers sold little more than 1 crore shares of ITC during the quarter. Stocks Gaining and Losing Traction Stocks that have witnessed continuous buying over the last 6 months Company % change in No. of shares held % change in of Shares held No. of shares held - No. of shares held - Apr Market value - (Rs. In crores) Market value - Apr (Rs. In crores) Sterling Holiday Resorts India Ltd 10, , , Praj Industries Ltd 8, , , TV Today Network Ltd 6, , , Andhra Bank 2, , , EIH Ltd 1, , , IDFC Ltd , , , , Aarti Industries Ltd , , Mahindra Ugine Steel Co Ltd , SKS Microfinance Ltd , , Indian Hotels Co Ltd , , NRB Bearings Ltd , , Gruh Finance Ltd , , Ajanta Pharma Ltd LG Balakrishnan & Bros Ltd , Shanthi Gears Ltd , Stocks that have witnessed continuous selling over the last 6 months Company % Change In Shares held % change in of Shares held No. of shares held - Sep No. of shares held - Apr Market value - (Rs. In crores) Market value - Apr (Rs. In crores) Tata Coffee Ltd Hindustan Oil Exploration Co Ltd , Geometric Ltd Shipping Corp of India Ltd Nucleus Software Exports Ltd , Prime Focus Ltd , , Dena Bank , MT Educare Ltd , Jaiprakash Power Ventures Ltd , , Adani Ports & Special Economic Zone Ltd , , Gujarat State Fertilizers & Chemicals Ltd , , Texmaco Rail & Engineering Ltd , , Vardhman Textiles Ltd , , M India Ltd ITC Ltd , , , , Tata Consultancy Services Ltd , , , , TVS Motor Co Ltd , ,

10 Sterling holidays which was added to mutual fund portfolios for the first time last last quarter has experienced continuous buying over the last 6 months. Fund managers seem to be quite interested in including this stock to their portfolios. Market value of shares held by mutual funds moved from Rs 50 lakh at the start of April to Rs 96 crores by end September. Infrastructure financing giant IDFC Ltd. witnessed a constant buying interest over the last 6 months. With growth in demand of credit for financing infrastructure projects and the company receiving a preliminary bank license has got fund managers accumulate this stock in huge quantities. The market value of shares held by mutual funds increased manifold to Rs 1,317 crores by September from Rs 113 crores as of April. Many well-known mid-cap companies such as TV Today Network, Andhra Bank, SKS Microfinance and Indian Hotels witnessed net buying month-on-month for the last 6 months. Accumulation of these stocks gives a clear signal that fund managers have a strong belief in fundamentals of these companies. Equity funds have steadily offloaded some of the well-known mid-caps like Tata Coffee, Hindustan Oil exploration and Shipping Corporation of India from their portfolios. As of September, equity mutual funds have negligible exposure to these companies

11 What s In What s Out Top new stocks added to portfolios during the quarter Company No. of Shares No. of funds held - in the Stock - Snowman Logistics Ltd 14, Sharda Cropchem Ltd 8, MTZ Polyfilms Ltd 6,325 1 Sanghi Industries Ltd 4,459 2 Gulf Oil Lubricants India Ltd 2, Pennar Industries Ltd 2,134 3 Smartlink Network Systems Ltd 1,426 4 Ahluwalia Contracts India Ltd 1,335 3 Mayur Uniquoters Ltd 1,162 3 Sequent Scientific Ltd Stocks totally exited from portfolios during the quarter Company No. of Shares held - No. of Funds in the Stock - Piramal Glass Ltd 1,506 3 PSL Ltd 1,503 1 Everest Kanto Cylinder Ltd 1,000 1 China Coal Energy Co Ltd H Shares 1,000 1 Bilcare Ltd Jubilant Industries Ltd International Paper APPM Ltd Ifb Agro Industries Ltd 90 1 Sun Art Retail Group Ltd 80 1 Triveni Engineering & Industries Ltd

12 Equity Mutual Funds: Market Capitalisation Exposure India OE Large Cap Fund Category India OE Large-Cap () (%) Large Cap exposure Small cap exposure Mid Cap exposure India OE Large-Cap (%) Sep-13 Dec-13 Mar-14 Jun-14 Sep-14 Large Cap exposure Small cap exposure Mid Cap exposure India OE Small/ Mid Cap Fund Category India OE Small/Mid-Cap () (%) Large Cap exposure Small cap exposure Mid Cap exposure India OE Small/Mid-Cap (%) Sep-13 Dec-13 Mar-14 Jun-14 Sep-14 Large Cap exposure Small cap exposure Mid Cap exposure India OE ELSS Fund Category India OE ELSS (Tax Savings) () (%) Large Cap exposure Small cap exposure Mid Cap exposure India OE ELSS (Tax Savings) (%) Sep-13 Dec-13 Mar-14 Jun-14 Sep-14 Large Cap exposure Small cap exposure Mid Cap exposure

13 Average Cash Exposure for Equity Funds (%) Sep-13 Dec-13 Mar-14 Jun-14 Sep-14 India OE Large-Cap India OE Small/Mid-Cap India OE ELSS (Tax Savings) Cash-Rich Funds Scheme Cash & Current Holding % Cash & Current Holding % AUM () (Fig. in Cr.) AUM () (Fig. in Cr.) Escorts Growth Gr HSBC Dynamic Gr Quantum L/T Equity Gr Escorts Infrastructure Gr Birla Sun Life Financial Pln Agg Gr Religare Invesco Equity Gr Reliance Small Cap Gr , ICICI Pru Child Care Gift Reg Plan Quantum Tax Saving Gr Escorts Leading Sectors Gr Pramerica Midcap Opp(s) Fund Reg Gr Sundaram Equity Multiplier Gr ICICI Pru Midcap Reg Gr Reliance L/T Equity Gr ,729 1,242 Tata Retiremnt Sav Prgsv Gr UTI Mid Cap Gr ,689 1,170 Sahara Super 20 Gr Franklin Build India Gr

14 Equity mutual funds have slightly increased cash levels over this quarter. This could be a tactical call to reduce equity exposure as markets trade at all-time high levels. In most cases, equity funds with lower asset bases have relatively high cash exposures. Average Maturity for Debt Fund Categories Avg. Maturity in years Morningstar Fund Category Apr-14 May-14 Jun-14 Jul-14 Aug-14 Sep-14 India OE Short-Term Bond India OE Ultrashort Bond India OE Intermediate Bond India OE Short-Term Government Bond India OE Long-Term Government Bond India OE Intermediate Government Bond Debt fund managers have increased the average maturity across all duration products during the quarter ended September. With cooling down of inflation and improvement in macro-economic indicators, debt fund managers seem to be of the opinion that rate cuts are imminent in the near future and want to ride the yield curve by buying long-term bonds with the hopes of making a profit as yields fall

15 Credit Quality of Debt Funds Credit Quality Exposure: India OE Short-Term Bond Category India OE Short-Term Bond Sep-13 Dec-13 Mar-14 Jun-14 Sep-14 Credit Quality AAA Credit Quality AA Credit Quality A Credit Quality Exposure: India OE Ultrashort Bond Category India OE Ultrashort Bond Sep-13 Dec-13 Mar-14 Jun-14 Sep-14 Credit Quality AAA Credit Quality AA Credit Quality A Credit Quality Exposure: India OE Intermediate Bond Category India OE Intermediate Bond Sep-13 Dec-13 Mar-14 Jun-14 Sep-14 Credit Quality AAA Credit Quality AA Credit Quality A