Mutual Fund Stocks | Bank Stocks: Rs 43,000 crore-reshuffle! Mutual funds sell 3 bank stocks to pick 5 largecaps

Mutual funds are estimated to have sold stakes worth more than Rs 14,000 crore each in Axis Bank, ICICI Bank and HDFC Bank in April, shows calculations done by ICICI Securities. On the other hand, money managers are believed to have spent Rs 42,971 crore in picking 5 largecaps.

While MFs sold HDFC Bank shares worth Rs 14,172 crore, they bought almost an equal amount of Rs 14,985 crore in mortgage lender HDFC which is set to be merged with the private bank.

Money managers also appeared to have bought the dip in IT major Infosys after foreign investors dumped the stock calling the Q4 earnings as “shocking”. The post-earnings trading day – April 17 – saw Infosys shares crashing up to 12.2% to hit 52-week low at Rs 1,219 on BSE in the worst single day fall since 2019.

MFs were also seen making a Rs 6,700 crore contra bet on Nykaa shares which have lost around 18% of its value so far in the calendar year.

Mid and smallcap picks

MF data shows that Dixon Technologies, IGL, Crompton Greaves, Biocon and Poonawalla Fincorp were among the top 5 midcap picks while the smallcap segment saw buying in RHI Magnesita, PNB Housing, PVR Inox, IEX and CE Info Systems.

What should investors do?
In the first fortnight of May, FIIs bought financials worth around Rs 8,382 crore while making a minor selling of Rs 145 crore in IT stocks.

In Q4, Indian IT firms witnessed a 1% QoQ decline in US$ revenues — the first revenue decline in 11 quarters. Barring HCL Tech, aggregate CY23 PAT margin estimates for clients of all firms have seen cuts, with the steepest cuts for Infosys, followed by TechM, Wipro, and TCS.

Given steep cuts to both CY23 revenue and margin estimates for clients of Infosys, TechM, and Wipro, near-term demand outlook for these companies could be under pressure, Jefferies analysts Akshat Agarwal and Ankur Pant said. Given the weak positioning of top clients in Communication, Tech, and BFSI verticals, Coforge, TechM, Wipro, LTIMindtree, and TCS have higher exposure.

“TechM and Wipro seem to have the weakest growth outlook. However, a comparison of change in revenue growth expectations for IT firms and their top clients in FY24/CY23 vs FY23/CY22 suggests that Coforge, Wipro, and LTIM are at a greater risk of negative surprises on FY24 growth,” the analysts said.

Axis Securities said financials are holding the Q4FY23 performance and accounted for most of the incremental growth in the corporate earnings. The domestic brokerage has picked ICICI Bank, SBI, Bajaj Finance and Federal Bank among its top picks in the financial sector space.

(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of Economic Times)