Tech Stocks Surge as Mutual Funds Raise Bets Amid Broader Market Gains; Private Banks See Moderated Allocations

Tech Stocks Surge as Mutual Funds Raise Bets Amid Broader Market Gains; Private Banks See Moderated Allocations​

The shift in investor appetite within mutual funds (MFs) is clearly favoring technology, automobiles, and e-commerce. Motilal Oswal Financial Services' latest analysis of fund folios indicates a strategic movement into growth sectors, while allocations to private banks and capital goods have moderated. This move comes as the Nifty 50 gained 2.2 percent in July, closing at 24,384, thereby crossing the crucial 24,000 mark for the second consecutive month.

Focus on Technology and Consumer Growth Sectors​

Mutual funds significantly boosted their exposure to technology stocks, increasing its portfolio weight by 70 basis points (bps) month-on-month to 6.6 percent in July. This increase marked a strong reversal from the all-time low of 5.9 percent seen in June.

Automobile allocation also continued its upward trend, rising 30 bps to 8.9 percent for the third consecutive month. E-commerce saw similar gains, with its weight climbing by 30 bps to 3.1 percent in July, hitting an all-time high. Both sectors remain strong performers, holding a considerable buffer compared to their positions one year ago.

Cooling Trend Noted in Financials and Industrial Goods​

In contrast, private banks experienced a decline in mutual fund allocations, with the sector's weight falling to 17.4 percent in July. This represents a decrease of 50 bps from both the previous month and one year prior.

Capital goods also witnessed a reversal after reaching a 24-month high of 8.1 percent in June. The allocation for capital goods fell by 50 bps to 7.6 percent in July, though it remains 30 bps higher than its level a year ago. Allocations to several other sectors, including utilities, oil and gas, PSU banks, retail, insurance, and consumer durables, also moderated during the reporting month.

Key Divergences in Fund Ownership Across Sectors​

A granular look at fund ownership reveals varied sentiment across different market segments. NBFC-non-lending and healthcare emerged as areas where the largest number of funds were overweight by at least 1 percentage point, with 15 funds showing increased holdings each. E-commerce was also over-owned by 10 funds.

Oil and gas registered the highest number of underweight valuations among all sectors, recording 19 funds below their BSE 200 weight. Private banks followed closely, being under-owned by 15 funds. Consumer, PSU banks, and utilities were similarly challenged, with 14, 12, and 11 funds respectively reporting a reduced allocation compared to the BSE 200 benchmark.

Stock Level Shifts: Bharti Airtel Leads Gains​

At the stock level, mutual fund positioning showed significant divergence even within thriving sectors. Motilal Oswal noted that Bharti Airtel recorded the largest month-on-month increase in the value of mutual fund holdings. Infosys and Bajaj Finance also featured among the stocks with substantial increases in MF holdings.

Conversely, HDFC Bank recorded the biggest decline in the value of mutual fund holdings during July. Other stocks that saw sharp declines included Axis Bank, L&T, Varun Beverages, Trent, Bharat Electronics, Dr Reddy’s Laboratories, Avenue Supermarts, Bank of Baroda, and NTPC.

Mutual Fund AUM: Net Inflows Moderate as SIPs Remain Resilient​

Equity scheme sales rose 2.3 percent month-on-month to ₹79,800 crore, while redemptions increased by 9.1 percent reaching ₹53,600 crore. Consequently, net equity inflows moderated to ₹26,200 crore in July, down from the ₹28,900 crore recorded in June.

Despite the moderation in net inflow, Systematic Investment Plan (SIP) contributions remained robust at ₹31,960 crore. This figure represents a 0.6 percent rise month-on-month and is up 12.3 percent year-on-year, signaling continued investor commitment to long-term accumulation.