Fund managers carefully select stocks based on various factors.
It is said that picking stocks in a bull market is not easy. While we know that invest in stocks As one of the best ways to create wealth, picking the right stocks comes with difficulty.
You need to separate the good stocks from the junk ones, or you’ll find a Reliance Power-like story in every bull market.
But wait! There is another way. You can easily get out and see what the fund managers are buying.
Fund managers carefully select stocks based on various factors and do not take into account the best stocks to sell.
Mind you, fund managers can also make mistakes, so mimicking their portfolio does not provide a clear solution.
In today’s post, let’s take a look at the top stocks that fund managers just can’t get enough of.
Calling it the ‘most wanted stock’ or ‘mutual fund favorite’, fund managers have been betting on these companies, for a long time.
HDFC Bank No. 1
HDFC Bank seems to be the most preferred stock that equity mutual funds own. And why isn’t it included in the stock’s performance in times of volatility.
Investors choose to bet safely when there is uncertainty about the stock market’s outlook.
It’s no surprise that HDFC Bank holds the distinction as it reports profit growth of more than 20% YoY per quarter for over 40 quarters. Meanwhile, its net NPA has never exceeded 0.5% of loans!
It tops the list with banks that have Lowest NPA.
HDFC Bank has consistently reported good profits, with high profitability compared to peers and well-managed private lenders.
Even in 2020, when the entire banking industry was affected by the pandemic, HDFC Bank reached out to large enterprises to meet their funding requirements, which was made possible thanks to its balance sheet. Strong accounting.
This bank, despite having less than 10% market share in the banking sector, is one of the most highly rated banks in the country.
Overall, mutual fund holdings in HDFC Bank stood at 14.5% as of September 2021. Mutual funds increased their holdings in HDFC Bank by 0.84% in the most recent quarter.
#2 Bank ICICI
In August of this year, ICICI Bank overtook HDFC Bank to become the most widely owned stock by mutual fund managers. HDFC Bank has dominated this position for several years.
ICICI Bank has also outperformed HDFC Bank in terms of stock trading over the past year.
In 2018, ICICI Bank appointed Sandeep Bakshi as CEO and since then, the private lender has seen improvements in earnings, asset quality as well as net profit margins.
Together with its subsidiaries, the private bank has a wide presence in various financial services sectors such as life insurance, general insurance, commercial banking, wealth management, etc., with leadership positions in many of these businesses.
The mutual funds hold 27.2% of the total outstanding shares in ICICI Bank as of September 2021.
Did you know that ICICI Bank is also one of the favorite stocks of foreign investors? As of September 2021, FII holds a substantial 47.3% stake in the private lending company.
#3 Infosys
Infosys is one of the most popular stocks in the domestic mutual fund industry currently holding a 12.2% stake in the company.
You can’t ignore Infosys… it’s like if a stock fell more than 10% in a day, mutual fund managers would buy the stock.
The top three mutual funds by AUM (SBI Mutual Fund, ICICI Prudential Mutual Fund and HDFC Mutual Fund) have Infosys among their top 5 stocks by value.
But why do they prefer Infosys over TCS? In terms of revenue and profit growth, Infosys has an edge over TCS.
In the past year, Infosys has outperformed the benchmarks by more than 50%.
#4 Reliance Industries
While the 4.6 percent holdings of mutual funds in Reliance Industries may seem like less, it’s a lot when you compare it by market value.
There was a time when fund managers wanted to buy more shares of Reliance but could not be guided by the market regulator. These guidelines do not allow actively managed diversified equity plans to own more than 10% in a stock. Once this limit is reached, the weight in a plan can only be increased as the share price increases.
For example, when the market started to recover in June 2020, after the March 2020 crash, fund managers were unable to buy more shares of Reliance Industries, one of the top performing companies at the time. that point.
India’s most valuable company is also FII’s favorite, holding a substantial stake above 25%.
# 5 HDFC
Mutual fund holdings in Housing Development Finance (HDFC) stood at 9.3% as of September 2021. Fund managers increased their holdings by 0.44% in the recent quarter. here most.
Interestingly, HDFC topped the list of stocks with the highest percentage of FII ownership. FII holds a huge 72% stake in HDFC!
HDFC is focusing on housing demand in the affordable housing segment. Despite increasing competition from banks in the home loan segment, HDFC is well positioned to benefit from the government’s strong focus on affordable housing.
The company is one of the largest housing finance providers in India. It has also built a reputation as a solid financial institution. Not only in India but all over the world.
HDFC has the ability to weather cycles of rising inflation and interest rates without adding NPA provisioning costs on its books.
At the same time, it is possible to mobilize capital through the form of long-term deposit with attractive interest rates.
HDFC has been able to grow profits at 17% per year over the past decade.
All of these reasons provide a sufficient margin of safety for mutual fund managers to bet on mortgage lenders.
#6 State Bank of India (SBI)
SBI is India’s largest bank not by market capitalization but by market credit/lending.
After several years of trouble, SBI’s asset quality problems have finally been resolved.
SBI’s subsidiaries (SBI Mutual Fund, SBI Life Insurance and SBI Card) give it an edge as they all demonstrate strong performance and are market leaders in their segments. .
As of September 2021, mutual funds hold 13% of the bank’s shares with a market value of more than Rs 33,000 crore.
In terms of stock trading, the bank had good results compared to other banks in the same industry. It has increased by about 90%.
#7 Kotak Mahindra Bank
As of September 2021, mutual funds hold an 8.3% stake in Kotak Mahindra Bank.
Kotak Mahindra Bank has transformed itself from an invoice discounting company into an auto financier to a multi-purpose bank, a broker, an insurance company, an asset manager and finally a a fintech expert.
The bank is India’s third largest private sector bank by market capitalization. It provides financial products and services to corporate and retail clients in the areas of personal finance, investment banking, life insurance and wealth management.
Over the past few years, Kotak Mahindra Bank has demonstrated a very consistent and sound historical track record.
Kotak Bank is one of the top choices of mutual funds, due to its institution’s memory of going through one credit crisis after another for almost 25 years.
This week, Life Insurance Corporation (LIC) received approval from the Reserve Bank of India (RBI) to increase its stake in the private lender to 9.99% from the previous level. 4.96% current.
What other stocks are fund managers bullish on?
The list above includes the top stocks held by mutual funds based on market value.
Now let’s look at the stocks the mutual fund holds the most as a percentage of total outstanding shares.
Keep track of which mutual funds are buying and selling…
A clever way to filter stocks is to find out who else is buying them. By tracking this activity, it will be easier for you to understand a stock’s outlook.
Have you ever wondered if there is a stock screener that allows you to find all of this with just one click? Equitymaster has got you covered.
We recently launched Stock Screening Machine which filters the stocks that mutual funds and institutional investors are buying and selling.
(This article is provided from Equitymaster.com)
(This story has not been edited by NDTV staff and was automatically generated from the feed provided.)
