India-focused funds based abroad are reshuffling their portfolios to deal with uncertainties that have crept up in recent months.

Franklin Templeton Investment (Franklin India MF) reduced its exposure by $830 million (Rs 58.6 billion) in the September quarter. Aberdeen Global (Indian Equity Fund MF) pruned its exposure by $130 million (Rs 9.1 billion) in October.  

While the extent to which this cut was related to price fluctuations couldn't be ascertained, Bloomberg data shows Franklin India MF had reduced its shares' position in 19 of the 42 companies in its portfolio. It only increased its stake in six entities; its shareholding was unchanged in 16 others. Notably, it completely exited its position in five companies, including Axis Bank, State Bank of India and HCL Technologies.

In the case of Aberdeen Global Indian Equity Fund, the stakes were raised in four companies, while the shareholding was cut in 11 others. In the remaining 19, the share position was left unchanged. 

In its fund manager's report for October, Aberdeen New India Investment Trust said: "Indian equities may face difficult times ahead, with the outlook continuing to remain murky as geopolitical and trade tensions weigh on sentiment. At home, the rupee will face pressure, given mounting concerns of an economic slowdown from elevated oil prices, tighter liquidity conditions, rising cost pressures and potential contagion effects from the IL&FS fallout. Political noise could grow louder as India enters the election season." 

While one of these concerns seems to be abating, with crude oil prices falling around 30 per cent since the start of October, political headwinds have gained momentum in recent months. Analysts believe the state elections lined-up before the 2019 general election could influence the medium-term direction of the markets. 

In this environment, foreign fund managers are looking to stick to long-term structural stories, rather than going all out in search of new opportunities. "We remain positioned in companies that will continue to benefit from India's long-term consumption trends, as well as those that play into the strength of what India has to offer in information technology (IT) services and health care. We also view the current stress in the financial sector as an opportunity to build up on high-quality commercial banks with solid deposit franchises," went Aberdeen's fund manager report.

The data shows its Indian Fund had marginally increased its exposure to the consumer discretionary products segment by 0.7 per cent in October. It raised exposure to financial entities by 1.7 per cent. At the end of October, the fund's sectoral exposure was 26.2 per cent to financials, 18.7 per cent to consumer staples and 18.2 per cent to technology.

Among individual names, the fund's exposure was down in Tata Consultancy Services (by around $27 million), Sun Pharmaceutical Industries ($22 million), Mphasis ($16 million), Grasim Industries ($10 million), Emami ($9 million), ITC ($8 million), HDFC ($7 million) and Godrej Consumer ($6 million).

Franklin India MF also increased its exposure to consumer discretionaries; it rose 2.4 per cent in the September quarter. Exposure to financials reduced 5.6 per cent.

Among individual names, the fund's exposure fell the largest in Infosys (by $136 million), followed by YES Bank ($83 million), Kotak Mahindra Bank ($73 million), HDFC Bank ($70 million), Axis Bank ($66 million), State Bank of India ($64 million), Dr Reddy's Labs ($60 million) and HCL Technologies ($48 million).

At the end of the quarter, its exposure to financials was 25.7 per cent. To technology, 15.8 per cent; to consumer discretionaries, 13.8 per cent. However, unlike Aberdeen's fund, which had high exposure to consumer staples, Franklin India MF's exposure to the sector was 8.3 per cent, among its lowest.