Large cap, mid-cap and small caps that MFs traded in November 2022

15 Dec 2022 , 09:29 AM

In the current year, November 2022 was the second best month in terms of FPI flows after August 2022. However, it is not just the FPIs that are driving the Indian markets, but even domestic mutual funds have acquired enough heft to impact and move markets.

Indian equity mutual funds saw small inflows in November 2022 with NFOs and SIP contributing their might to the flows into equity funds. If NFOs infused Rs7,191 crore in November, SIP flows were to the tune of Rs13,306 crore, the best such level till date. Among NFOs, the FTPs on the debt side attracted interest, while equity fund action was restricted to sector funds and index funds. But the bigger question is, what have the mutual funds been doing with all these flows?

One way to answer this question is to get a macro picture of where the flows are directed. We look at the mutual funds overall and conduct a reality check on the major stocks that were bought and sold by the mutual funds. Remember, mutual funds manage more than Rs40 trillion today and that is a lot of money to play around with. Here we do not look at specific AMCs but on the overall picture of what mutual funds did during the month. To avoid the risk of comparing apples and oranges, we have separately covered the large cap, mid-cap and small cap preferences of mutual funds for the month of November 2022.

How Mutual Funds churned large cap stocks in November 2022?

How do we define large caps here? For the sake of simplicity, we stick to the AMFI definition based on market cap rankings. Under the AMFI methodology, the universe of listed stocks on NSE and BSE are ranked descending based on their market cap. Out of this list, the top-100 stocks by market capitalization are classified as large cap stocks. This list is monitored and reviewed by AMFI every 6 months to ensure definitions are current. Here are the major large cap stocks that mutual funds bought and sold in November 2022.

We begin with the large cap buying by the mutual funds in November 2022. Overall, the mutual funds added 698 lakh shares of Tata Steel Ltd, 554 lakh shares of Zomato Ltd, 314 lakh shares of FSN E-Commerce Ventures (Nykaa), 272 lakh shares of GAIL India, 127 lakh shares of Bandhan Bank, 80 lakh shares of Vedanta Ltd and 66 lakh shares of ICICI Prudential Life Insurance. Apart from the above mentioned stocks, mutual funds also added smaller quantities of Paytm, Apollo Hospitals and Indus Towers in November 2022. The bias seems to be clearly towards picking up under-priced digital stocks at discounts to IPO price.

We now turn to major large cap selling by mutual funds in the month of November 2022. The selling was quite prominent in select stocks that had shown a tendence to rally sharply in the recent past. A total of 354 lakh shares of Bank of Baroda were sold, apart from 149 lakh shares of HCL Technologies Ltd and 142 lakh shares of Hindalco Ltd. During the month of November 2022, other major stocks sold included 130 lakh shares of HDFC Life Insurance, 84 lakh shares of UPL Ltd, 63 lakh shares of Dabur India, 23 lakh shares of Berger Paints and 17 lakh shares of Adani Enterprises. In addition, mutual funds sold smaller quantities of Dr Reddy’s Laboratories and Piramal Enterprises Ltd.

How mutual funds churned mid-cap stocks in November 2022?

Let us now turn to the methodology used to classify a stock as mid-cap? Here also, we stick to the standard AMFI definition. Once the top 100 stocks by market cap are classified as large cap stocks (as explained previously), the 101st to 250th ranked stocks by market cap are classified as mid-cap stocks. Here is a quick glance at the mid-cap stocks that mutual funds bought and sold in the month of November 2022.

Let us first focus on the mid-cap buying in the month of November 2022. Overall, mutual funds added 597 lakh shares of Union Bank, 292 lakh shares of Steel Authority of India (SAIL), 232 lakh shares Delhivery Ltd, 132 lakh shares of NMDC Ltd, 131 lakh shares of Bank of India and 109 lakh shares of listed digital market place, PB Fintech (Paisabazaar). Mutual Funds also added 164 lakh shares of GMR Infrastructure, 56 lakh shares of Shriram Finance, 50 lakh shares of Biocon Ltd and 48 lakh shares of Aditya Birla Capital Ltd. The mid-cap buying was predominantly focused on alpha seeking, buying stocks with favourable price traction and offering a value proposition with momentum.

We now turn to the major mid-cap selling. In November 2022. Mutual Funds sold 453 lakh shares of IRCTC, 308 lakh shares of Indian Hotels, 287 lakh shares of Bharat Heavy Electricals Ltd (BHEL) and 217 lakh shares of Vodafone Idea Ltd among the heavy sell candidates. Mutual funds also sold 40 lakh shares of Aurobindo Pharma, 31 lakh shares of Tube Investments Ltd and 23 lakh shares of ABB India Ltd. In addition, the mutual funds were marginal sellers in Patanjali Foods, Godrej Industries and L&T Technology Services (LTTS).

How mutual funds churned small cap stocks in November 2022?

Finally we turn to the small cap stocks category. On market cap ranking, the stocks ranked 251st and lower are classified as small caps as per AMFI definition. We continue to use that definition for our rankings also. Here is a quick snapshot of some of the key small cap stocks where mutual funds were active in November 2022. Typically, small caps and mid-caps tend to outperform the large caps when the undertone of the market is bullish.

In November 2022, mutual funds added 37 lakh fresh shares of Jindal Stainless, 36 lakh shares of Orient Paper & Industries, 31 lakh shares of PCHL ( formerly Phillips Carbon Black Ltd) and 24 lakh shares of Strides Pharma Science Ltd. In addition, small cap stocks purchased included 17 lakh shares of Intellect Design Arena (formerly Polaris), 14 lakh shares of Pricol Ltd and 12 lakh shares of Mayur Uniquoters Ltd. Mutual funds also added smaller quantities of IIFL Finance, Amara Raja Batteries and TCPL Packaging during the month of November 2022.

Finally, let us look at small-cap selling in November 2022. Mutual funds sold 34 lakh shares of Easy Trip Planners, 27 lakh shares of Fino Payments Bank, 17 lakh shares of Rain Industries and 15 lakh shares of Railtel Corporation Ltd. In addition, mutual funds also sold smaller quantities of select small cap stocks including HEG Ltd, IIFL Wealth Management, JK Paper, Cochin Shipyard, Mazagon Dock Shipbuilders and Indigo Paints Ltd.

What is the gist of the story that emerges from the November 2022 mutual fund churn data? In the large caps, there is a shift into new age digital stocks and metals while selling out of sterling performers in the recent past. There is still a lot of alpha hunting visible in the mid-caps and the small caps and it is entirely stock specific. Amidst the volatility, Mutual funds have made the best of the conditions.