Mutual Funds October Data: Banking sector witness maximum traction; AMCs pick small lenders vs big banks – what should you know?

Mutual Fund October Data: The banking sector saw maximum movement in October, as per the latest Association of Mutual Funds in India (AMFI) data. The Mutual funds sold big banking stocks, while bought stakes in small lenders in the hope that small banks will benefit from the pick-up in the credit cycle, a Zee Business research report said.

The asset management companies have also picked small lenders mainly due to good results in the second quarter of the financial year 2022-23 (Q2FY23). Small lenders – Mutual Funds bought are Karur Vysya Bank (+28%), Canara Bank (+27%), and Bank of India (+25%), the report added.

Image Source: Motilal Oswal Report

The MF houses also bought in selected stocks that were weak in recent years amid improving market conditions and sentiments. They bought stakes in pharma, IT, defense, and building materials among others due to cheap valuations, Zee Business research report said quoting AMFI data.

Image Source: ICICI Securities Report

The Indian markets bounced back smartly in October 2022 with Nifty50 rising 5.4 per cent month-on-month (MoM) and almost wiping out the entire year-to-date decline. While Foreign institutional investors (FIIs) turned net buyers in the previous month, after withdrawing in September.

Image Source: ICICI Securities Report

According to Motilal Oswal, equity AUM (Asset Under Management), including ELSS and index funds, of domestic MFs reached new highs of Rs 16.4 trillion, up over 4.2 per cent MoM in October 2022.

Image Source: ICICI Securities Report

In sector-wise weightage, MFs showed an interest in Banks (Private and PSU), Technology, Oil & Gas, Capital Goods, and Utilities leading to an MoM increase in their weights. Private Banks (18.7%) were the top sector holding for MFs in October, followed by Technology (10%), the brokerage said.

Among the top 10 funds, the highest MoM rise was seen in HDFC Mutual Fund (up 5.7%) followed by SBI Mutual Fund (up 5.6%), ICICI Prudential Mutual Fund (up 5.1%), Nippon India Mutual Fund (up 4.8%), and UTI Mutual Fund (up 4.7%), Motilal Oswal also said quoting AMFI data for October.

Highlights

Private Banks’ weight increased to a 20-month high of 18.7% - up 50 basis points (bps) MoM and 110 bps year-on-year in October.

PSU Banks’ weight increased to a 32-month high of 3.7% - up 20 bps MoM and YoY each in October.

Technology’s weight, after declining to a 25-month low in September, climbed in October to 10% - up 20bp MoM and down 170 bp YoY.

Consumers’ weight, after rising to an 18-month high in September, moderated in October to 6.8%, down 30bp MoM, up 40 bp YoY.

In terms of value increase MoM, five of the top-10 stocks were from the BFSI space: Axis Bank (+INR107.3b), ICICI Bank (+INR75.6b), HDFC Bank (+INR61.1b), SBI (+INR45.4b), and HDFC (+INR44.4b).