With a sharp rise in benchmark indices, changing market dynamics and focus shifting towards infrastructure development and domestic consumption, the mutual fund industry has realigned its exposure across various sectors in the last one year. While sectors like auto, capital goods and industrial products witnessed a rise in mutual fund exposure, information technology (IT), oil and pharma saw a decline.
Auto sector was the biggest beneficiary and its market share rose 1.68 percentage points from 5 per cent in March 2014 to 6.69 per cent as on March 2015. The mutual fund exposure in automobile companies rose from Rs 10,210 crore to Rs 24,108 crore in the same period both as a result of a rise in share prices of automobile companies and also because of a rise in investment by mutual fund companies.
The other major gainers were finance and industrial capital goods as their market share rose by 1.33 and 1.3 per cent, respectively.
On the other hand the biggest loser in mutual fund exposure over the past one year has been the information technology sector as its share declined 1.9 per cent from 11.92 per cent in March 2014 to 10.02 per cent in March 2015.
The overall mutual fund exposure in information technology companies, however, rose from Rs 24,315 crore in March 2014 to Rs 36,121 crore till March 2015 as a result of an rise in the share prices of the companies.
Oil, petroleum products and pharmaceuticals also witnessed a decline in their share of MF funds. While it dropped 1.67 percentage point for oil companies, share of petroleum product and pharma sector declined 1.56 percentage and 0.6 percentage points, respectively.
“Investments have moved into domestic economy linked sectors such as automobile and capital goods as against IT and pharma sectors which are more dependent on global economy. Also companies within the capital goods and industrial products were earlier available at better valuations,” said Harsha Upadhyaya, CIO, Kotak Mutual Fund.
While oil companies have also lost out, there are some who say that money moved out from the oil sector on account of profit booking and concerns over drop in oil prices. While some investors booked profits and moved out after the industry witnessed re-rating following the diesel deregulation, there are many who are wary of the performance of oil producers because of the decline in oil prices.
The 2014-15 financial year saw mutual fund investments into Indian equities rise 76 per cent from Rs 2,03,963 crore in March 2014 to Rs 3,60,395 crore in March 2015 on the back of a sharp rise in equity markets and record net inflows of Rs 68,121 crore into equity schemes by investors in FY15.
The banking sector continues to enjoy the biggest share of MF investment and its share rose further from 19.76 per cent to 20.4 per cent. Despite the realignment and decline in market share of software sector, it still is the second largest after banking sector with total exposure at 10 per cent. Pharma and auto are the next big sectors attracting MF investment.