MFs shuffle portfolios; ITC, TCS & ONGC out of top picks

The top ten stock picks of India's equity mutual fund managers underwent a sharp re-shuffle in 2014-15. MF managers not only changed their preferences for stocks but also ousted three heavyweight counters from their top holdings during the year, reducing concentration of equity assets in these stocks by around 440 basis points.

Sectoral giants - FMCG major ITC, largest software company Tata Consultancy Services (TCS) and oil explorer Oil and Natural Gas Corporation (ONGC) - were all out from the top picks.

Fund managers found their replacements in companies like Axis Bank, Bharat Petroleum Corporation (BPCL) and Telecom major Bharti Airtel.

With nearly 25% gains on key stock indices during the year, fund managers wasted no time and churned portfolios in order to make the most of the rally. Uncomfortably higher valuation of ITC - the only FMCG stock in top picks - made fund managers do away with the stock while weak crude prices prompted them to cut allocations to ONGC.

ICICI Bank, India's largest private sector bank, lost its top position to HDFC Bank as the most sought after stock. Shares of latter cornered 4.7% of equity AUM or Rs 13,784 crore.

"Both these banks are best placed in the private sector space to benefit from an expected economic recovery. There could be some headwinds in the near term but that will be an opportunity to add more," said equity head of large fund house who requested anonymity as the query was stock specific.

Software giant Infosys slipped to the third slot from second as fund managers pruned exposure. About 3.73% of equity assets was invested in the IT major. Fund managers are banking on the new management under Vishal Sikka.

"There are issues of margin pressure for IT companies. But, it would not be pragmatic to do away with it completely. Exposure to TCS has only gone down, not that we have ignored it. In case of Infosys, we are largely pinning hopes on the credential of new management under Sikka for the next turnaround story," explained chief investment officer (CIO) of a fund house.

In HDFC Bank, ICICI Bank and Infosys, collectively, fund managers pumped in nearly Rs 37,300 crore or about 11% of overall equity assets. A year before, the quantum stood at Rs 24,700 crore.

Meanwhile, State Bank of India (SBI), country's largest lender, despite being a public sector bank has moved two notches higher from sixth to fourth position - piping Larsen & Toubro (L&T) and Reliance Industries (RIL). The counter is the only one from the public sector bank category in the top 10. The schemes managed by India's biggest fund manager Prashant Jain have substantial exposure in SBI.

Capital Goods major L&T is the fifth most invested stock while Axis Bank and Maruti Suzuki have made up to sixth and seventh position. RIL, once part of the top five holdings, was relegated to eight slot, with only 1.5% exposure of the equity assets. Maruti, in particular, needs a special mention as the counter entered MFs' top ten holdings in March last year when fund managers cried foul on its Gujarat unit expansion under its parent company Suzuki. However, since then the counter kept gaining importance in portfolios and it climbed three notches up from tenth to seventh position.

What is noteworthy is the fact that FY15 witnessed reduction in concentration of equity assets in select stocks. Against the 31.71% of assets in top ten holdings in FY14, the year saw 27.32% of assets going into these holdings. This suggests that fund managers diversified their investments in various other counters during the year as the indices moved higher.