Large cap, mid-cap, and small caps that MFs traded in April 2023

16 May 2023 , 09:50 AM

In fact, April saw a lot more of positive action from the FPIs than from the domestic funds. However, that is not to say that domestic funds did not adequately churn their equity portfolios. Mutual fund flows into equities stayed robust and in FY23 equity fund flows were positive in all the 12 months of the year. For the mutual funds, inflows came from new fund offerings (NFOs) and from systematic investment plans (SIPs). In short, a lot of money has been flowing into the coffers of mutual funds and the big question what they did with all that money?

April 2023 saw moderate equity fund flows, robust SIP flows

April 2023 marked the 19th consecutive month when the domestic mutual funds were buyers in the Indian equity market. That has more than made up for the heavy selling in Indian equities by the FPIs. Even as the FPIs have been sceptical on India amidst domestic and global headwinds, the mutual funds continue to nibble at stocks at lower levels. However, domestic mutual funds have been very smart churners of their portfolios.

If you look at the month of April 2023, flows into equity funds were moderate at Rs6,480 crore. That may be sharply lower than in March 2023 but the cumulative money is substantial to juggle with. Also, the volatility provides numerous opportunities for mutual funds to revamp their holdings. In April 2023, Indian mutual funds got SIP inflows of Rs13,728 crore while NFOs collected just above Rs1,600 crore. Even if you leave the NFOs aside, what matters is that the net SIP flow ratio in FY23 has gone up sharply from 38% to 54%. That is a lot of sticky SIP money giving investable surpluses to the fund managers.

Today, the AUM of mutual funds is at an all-time peak of Rs41.5 trillion and the active equity fund AUM alone is over Rs15 trillion. We are not even counting the equity holdings of hybrid funds and passive funds and if that is added the equity AUM would be well above Rs20 trillion. In the month of April 2023, the domestic mutual funds were aggressively churning their portfolios. Here we look at a granular picture of mutual fund portfolio churn, based on the market capitalization of stocks held.

Large cap stocks that mutual funds churned in April 2023

How exactly do we define the large caps? For simplicity, we stick to the AMFI definition based on market cap rankings. As per the AMFI methodology, firstly the combined universe of listed stocks on NSE and BSE are ranked descending based on market capitalization. From this list, the top-100 stocks by market capitalization are classified as large cap stocks. This list is reviewed by AMFI on a half yearly basis to ensure definitions are up to date. Here are major large cap stocks mutual funds bought and sold in April 2023.

Let us start with the mutual fund large cap buys first! Overall, the mutual funds added 700 lakh shares of Zomato Ltd, 541 lakh shares of FSN Ecommerce Ventures Ltd (Nykaa), 372 lakh shares of Samvardhana Motherson International, 63 lakh shares of Cipla Ltd, 33 lakh shares of Godrej Consumer Products, 19 lakh shares of Adani Enterprises, 16 lakh shares of Hindustan Zinc and 14 lakh shares of Indus Towers. Apart from the above, mutual funds added smaller quantities of Berger Paints and Siemens too. Interestingly, there seems to be a lot of interest among mutual funds in buying digital start-up stocks in April 2023.

We now turn to major large cap selling by mutual funds in April 2023. The selling was prominent in the stocks belonging to the insurance space and the commodity players on fears that a delayed recovery in China might delay the bounce in commodity prices. Let us look at the major sell candidates. There was heavy selling of 109 lakh shares in HDFC Life Insurance. A total of 73 lakh shares of Wipro Ltd were sold, apart from 66 lakh shares of Vedanta Ltd, 27 lakh shares of LIC of India, 22 lakh shares of SRF Ltd, 20 lakh shares of JSW Steel, 12 lakh shares of Eicher Motors and 11 lakh shares of Hero MotoCorp. Apart from these, mutual funds also sold smaller quantities of Dr. Reddy Laboratories and Adani Total Gas in the April 2023.

Major mutual fund buying and selling in mid-caps in April 2023

Let us revisit the AMFI methodology to classify a stock as mid-caps? Under the AMFI definition, once the top 100 stocks by market cap are classified as large cap stocks, the 101st to 250th ranked stocks by market cap would qualify as mid-caps. Here are the mid-cap stocks that mutual funds bought and sold in April 2023.

Let us first focus on mid-cap buying in April 2023. Overall, mutual funds added 241 lakh shares of Bharat Heavy Electricals Ltd (BHEL), 116 lakh shares of GMR Airports Infrastructure, 89 lakh shares of Poonawalla Fincorp, 51 lakh shares of L&T Finance Holdings, 46 lakh shares of Petronet LNG, 12 lakh shares each of Dixon Technologies and Piramal Enterprises. In addition, mutual funds added smaller quantities of Star Health and Allied Insurance Ltd and Dr Lal Pathlabs too.

We now turn to major mid-cap selling. In April 2023. Mutual Funds sold 376 lakh shares of IRFC Ltd, 280 lakh shares of Ashok Leyland, 184 lakh shares of Max Healthcare Ltd, 152 lakh shares of NMDC Ltd, 85 lakh shares of Aditya Birla Fashions, 53 lakh shares of Bank of India, 48 lakh shares of Laurus Labs and 19 lakh shares each of Tata Chemicals and Bata India. In addition, the mutual funds also sold smaller quantities of stocks like Patanjali Foods during the month of April 2023.

How mutual funds churned small caps in April 2023

We now turn to the small cap stocks. On market cap ranking, the stocks ranked 251st and lower are classified as small caps by AMFI. Here is a quick snapshot of key small cap stocks where mutual funds were active in April 2023. 

In April 2023, mutual funds added 119 lakh fresh shares of RHI Magnesita Ltd, 58 lakh shares of PNB Housing, 31 lakh shares of CMS Infosystems, 24 lakh shares of Marksans Pharma, 16 lakh shares of Minda Corporation, 10 lakh shares of CE Infosystems Ltd and 6 lakh shares of Eureka Forbes Ltd. In addition, mutual funds also purchased smaller quantities of small cap stocks like Mastek Ltd, Allcargo Logistics and Mahanagar Gas Ltd in April 2023.

Let us conclude with the small-cap selling in the month of April 2023. Mutual funds sold 38 lakh shares of Graphite India, 34 lakh shares of Time Technoplast, 21 lakh shares of Glenmark Pharma, 13 lakh shares each of Route Mobile & Religare Enterprises and 12 lakh shares of Kolte Patil Developers. In addition, the month of April 2023 also saw mutual funds selling smaller quantities of stocks like Ceat Ltd, Newgen Software Technologies, DCM Shriram and Andhra Paper.

Finally, for some takeaways from the buying and selling data of mutual funds in the month of April 2023? In the large caps, there is a shift into digital plays and away from the commodity stocks. In the mid-cap and the small cap space, the shifts are a lot more focused in favour of alpha. However, at a time when the concerns are more at a macro level and about global headwinds, the mutual funds are relying quite heavily on stock selection and stock churn for alpha. That is a good active strategy.