In February, as the Nifty benchmark index declined nearly 6%, mutual funds strategically adjusted their sectoral exposure. They increased stakes in private banks, non-banking financial companies (NBFCs), healthcare, telecom, and metals while trimming holdings in capital goods, technology, automobiles, consumer, oil & gas, utilities, PSU banks, retail, and infrastructure.

Mutual Fund Sectoral Weightage Overview

According to a recent report by Motilal Oswal Financial Services, private banks retained the highest sectoral weightage in mutual fund portfolios at 18.5%, reinforcing their stronghold. Technology held the second position with 9.3%, followed by automobiles at 8.1% and healthcare at 7.6%.

Conversely, capital goods saw a 60 basis points (bps) month-on-month (MoM) and 90 bps year-on-year (YoY) decline in allocation, settling at 6.8%. Mutual funds also reduced exposure to technology stocks, cutting their weightage by 30 bps MoM and 20 bps YoY to 9.3%. Additionally, the weightage for automobile stocks dropped to a 19-month low of 8.1%, reflecting a decline of 30 bps MoM and 10 bps YoY.

Sectoral Allocation Trends

The report highlighted sectors where mutual fund ownership was at least 1% lower compared to the BSE 200 index:

• Consumer sector (17 funds underweight)
• Oil & gas (17 funds underweight)
• Private banks (16 funds underweight)
• Technology (12 funds underweight)
• Utilities (12 funds underweight)

Conversely, mutual funds were overweight in certain sectors compared to the BSE 200 benchmark:

• Healthcare (16 funds overweight)
• Capital goods (11 funds overweight)
• Chemicals (10 funds overweight)
• Consumer durables (10 funds overweight)
• Retail (9 funds overweight)

Stock-Wise Mutual Fund Activity

For Nifty 50 stocks, mutual funds were net buyers in approximately 70% of stocks in February. The most significant MoM purchases were seen in:

• Dr Reddy’s Laboratories (+12%)
• Apollo Hospitals (+11%)
• Ultratech Cement (+8%)
• TCS (+7.1%)

Among Nifty Midcap 100 stocks, MFs were net buyers in around 58% of stocks, with notable investments in:

• Yes Bank
• IDFC First Bank
• Prestige Estates
• Bandhan Bank
• AU Small Finance Bank

Similarly, in the Nifty Smallcap 100 stocks, mutual funds increased holdings in 67% of stocks, with major purchases in:

• Happiest Minds
• Signature Global
• Action Construction
• IIFL Finance
• Glenmark Pharma

Key Takeaways for Investors

Mutual funds continue to align their sectoral exposure with evolving market conditions. The increasing allocation in private banks, NBFCs, and healthcare suggests confidence in these sectors’ growth potential. Meanwhile, the reduction in technology and automobile stocks indicates a cautious stance amid macroeconomic uncertainties. Investors should monitor these trends closely to align their portfolios with institutional strategies. For more in-depth stock market insights, stay updated with ISFM, India’s leading stock market training institute based in Gurgaon.