Mutual funds strategic moves in Indian stock market: November 2023 analysis

In the ever-evolving landscape of the Indian stock market, the behaviour of mutual funds often reflects significant trends and insights into the investment strategies adopted by institutional investors. November 2023 witnessed a dynamic interplay of buying patterns, sectoral preferences, and fund performances, offering a comprehensive snapshot of the market’s undercurrents.

Nifty Midcap 100

According to a report by one of the financial service companies, mutual funds demonstrated a keen interest in Nifty midcap-100 stocks, with net buying recorded in 64% of these stocks. Stocks that experienced substantial month-on-month net buying included Petronet LNG, JSW Energy, Sun TV Network, Aditya Birla Capital, and Vodafone Idea. This heightened interest reflects a calculated move by mutual funds to diversify and explore opportunities beyond the more conventional large-cap stocks.

Nifty50 

Within the Nifty-50 stocks, mutual funds were net buyers in 50% of the listed companies. Bajaj Finance, Adani Enterprises, Kotak Mahindra Bank, Tata Consumer, and JSW Steel were the top recipients of this increased attention, showcasing a shifting focus towards specific sectors and companies demonstrating robust growth potential.

If we analyse the stock prices of these companies compared to their all-time highs, Bajaj Finance and Kotak Mahindra Bank are trading approximately 11.5% and 7% lower than their respective all-time high prices, while Tata Consumer and JSW Steel are currently at their all-time high prices.

Sectoral Rotation 

Sectoral analysis unveils a strategic pivot in mutual funds’ portfolio allocations. Healthcare, Real Estate, Technology, Utilities, Retail, and Metals emerged as the sectors attracting increased investment. Conversely, Banking (both Private & PSU), Consumer-related sectors, Chemicals, and Consumer Durables experienced a decline in weightage, indicating a re-evaluation of risk and return dynamics by fund managers.

Private Banks constituted the highest sectoral holding for mutual funds in November 2023, followed by Technology, Autos, Capital Goods, and Healthcare. Notably, Real Estate, Metals, Healthcare, Retail, and Utilities witnessed substantial value increases during the month, portraying a shift in sectoral preferences towards segments showing promising growth trajectories.

AMCs Growth 

The report also highlighted a significant rise in total equity value for the top 20 Asset Management Companies (AMCs), indicating a 7.6% month-on-month increase and a substantial 25.3% year-on-year surge versus a 5.5% month-on-month rise and a 7.3% year-on-year surge. Among the top 10 funds, Nippon India Mutual Fund, Kotak Mahindra Mutual Fund, DSP Mutual Fund, HDFC Mutual Fund, and Axis Mutual Fund recorded notable month-on-month increases in their values, showcasing their adeptness in navigating the market landscape.

However, amidst this bullish trend, the month witnessed a decline in the sales of equity schemes, dropping by 10.5% month-on-month to Rs 430 billion. The pace of redemptions remained steady at Rs 261 billion, resulting in a moderation of net inflows to Rs 169 billion from the previous Rs 220 billion in October 2023.

Conclusion 

The movements observed in November 2023 underscore the intricate strategies adopted by mutual funds to optimize portfolios and capture emerging opportunities while maintaining a balanced risk profile. As the market dynamics continue to evolve, these insights into the behaviour of mutual funds provide valuable cues for investors navigating the ever-changing terrain of the Indian stock market.

Disclaimer: This blog has been written exclusively for educational purposes. The securities mentioned are only examples and not recommendations. It is based on several secondary sources on the internet and is subject to changes. Please consult an expert before making related decisions.