Fund houses bet on consumer stocks as new covid wave ebbs
PremiumWith the easing of covid lockdowns, signs of a faster recovery are visible across discretionary, said Emkay Global
Domestic mutual fund (MF) managers have begun betting big on consumer-centric stocks, anticipating a surge in demand as restrictions ease with the number of covid-19 cases declining aided by higher vaccination numbers across the country, data for June showed.
Consumer-focused stocks such as those of TVS Motor Company and ITC were the most bought by mutual fund houses in June, according to data sourced from Edelweiss Alternative Research and Ace MF.
TVS Motor Company received a net inflow of ₹1,275 crore, while there was a net investment of ₹1,210 crore in ITC in June.
Newly listed stock Sona BLW Precision Forgings Ltd, also known as Sona Comstar, received the highest inflow of ₹2,469 crore in June.
Consumer demand is likely to gain momentum following unlocking by most states, with the decline in covid cases and the vaccination drive continuing at a healthy pace, according to analysts.
“With the easing of lockdowns since June, signs of a faster recovery are visible across discretionary," said Emkay Global Financial Services Ltd.
Kotak Institutional Equities expects modest supply-chain disruptions for consumer companies because of the second covid wave and lockdown restrictions.
The brokerage firm expects steady demand trends in consumer staples, given the modest disruptions.
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“The discretionary/retail pack would be significantly impacted, though less than 1QFY21. Key trends are price increases aiding revenue growth and cushioning inflationary pressure across most companies, some weakness in personal care and modest uptick in in-home consumption and health/hygiene categories, and strong resilience in decorative paints demand," it said in a report on 6 July.
Other stocks bought by mutual funds in June are HDFC Bank, which saw a net inflow of ₹1,190 crore, Reliance Industries ( ₹1,038 crore), ICICI Bank ( ₹1,021 crore), Shriram Transport ( ₹918 crore), newly listed Krishna Institute of Medical Sciences ( ₹863 crore), SBI Cards and Payment ( ₹834 crore) and Tech Mahindra ( ₹830 crore).
The three stocks that were sold most by mutual funds in June are Infosys, with an outflow of ₹3,081 crore, ONGC ( ₹636 crore) and NTPC ( ₹600 crore).
Net inflows into equity mutual fund schemes in June fell by half from the previous month, as many investors chose to book profits when the markets hit record highs.
Net inflows into these schemes stood at ₹4,608.75 crore in June, down from ₹9,235.48 crore in May, according to data released by the Association of Mutual Funds in India. The figure was ₹225.25 crore in June 2020.
Redemptions rose to ₹18,974.82 crore in June from ₹14,169.63 crore in the previous month and ₹13,520.03 crore in June 2020.
Domestic institutional investors, including mutual funds, insurance companies and banks, invested ₹7,043.51 crore in equity schemes in June, much higher than the ₹2,067.23 crore invested in May.
Both Sensex and Nifty indices gained 1% in June, touching record highs. Inflows into monthly systematic investment plans rose slightly to ₹9,155.84 crore in June from ₹8,818.90 crore in May.
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