ATM :: A fourth of mutual fund equity assets concentrated in 10 stocks

ICICI Bank, HDFC Bank, Infosys, SBI and L&T among fund managers’ preferred bets
Chandan Kishore Kant | Mumbai September 9, 2014 Last Updated at 22:47 IST | Business Standard


A fourth of the assets under management (AUM) of equity mutual funds (MFs) are concentrated in only 10 top stocks such as those of ICICI Bank and HDFC Bank.

As on July, equity MF assets were Rs 2.6 lakh crore, of which Rs 65,200 crore or 25 per cent were invested in 10 frontline blue-chip stocks. ICICI Bank was the most preferred bet with MF investment of Rs 12,500 crore, followed by another private sector lender, HDFC Bank, with investment of about Rs 8,000 crore from fund houses.

The other top bets of equity MFs include technology firm Infosys, State Bank of India (SBI), Larsen & Toubro (L&T), Reliance Industries, Tata Consultancy Services, Maruti Suzuki, ITC and Axis Bank.

“These are the top market-cap companies and most equity schemes have to necessarily invest in these,” said Raghavendra Nath, managing director of Ladderup Wealth Management.

Sector officials said given the size of these companies, it is natural that a large part of MF investments would be made here.

“If you are managing equity funds benchmarked to the BSE 200 index, you can’t eschew investments in top market-cap companies. They will form part of most fund managers’ portfolio,” said the chief investment officer of one of the largest fund houses.

Shares of ICICI Bank have been picked by 270 equity schemes. Similarly, more than 200 equity schemes have investments in HDFC Bank, Infosys, SBI, L&T and RIL.

Experts said the ongoing market rally might see MF assets getting diversified. “During the start of the rally, a few stocks do see higher concentration of the AUM. But as the rally matures, incremental flows of money will go in other stocks,” said Nandkumar Surti, chief executive at JPMorgan MF.

This is already evident. A 30 per cent rally in the market has reduced the concentration of the top 10 stocks from 28 per cent in December 2013 to about 25 per cent in July 2014.

Interestingly, all MF top picks are the market leaders in their respective sectors. Fund managers tend to be comfortable having market leaders in their portfolios, said experts.

“In India, the large-cap companies’ universe is pretty small and this leads to concentration of large assets into few companies’ stocks. At this juncture, there is no substantial risk in it, as the percentage of market cap (subscribed by fund managers) of these companies is not substantial,” said Niranjan Risbood, director (fund research) at Morningstar India.

Source :

Integra’s Take: So as retail investors particularly the new entrants have an indicator here as to which stocks he can safely acquire in his shares portfolio. Go get them!

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