Mutual funds are on top of their game, with retail investors pooling in their investments in well-chosen equity funds. Despite global events like Brexit and US Fed rate hike, the Indian equity market has been largely rewarding.
The discerning, informed investor has continued to stay invested despite the market lows, and she/he has been generously rewarded for showing faith and exercising due patience. Though the market dipped to an embarrassing low in 2013, the S&P BSE Sensex still delivered a flattering 51 percent since that period. The top 5 equity mutual funds, be they large, mid-caps or multi-caps; have all delivered stupendously above 100 percent, even after the lows of 2013.
Since September 2013, Birla Sun Life Advantage has been on top of the game in large cap scenario, delivering 145 percent returns. In the multi-cap, the winner has been, L&T India Value Fund with 145 percent returns. Canara Robeco Emerging Equities with a jaw-dropping 218 percent returns, has been the top performer in the mid cap segment since 2013. So what sectors are these mutual funds really investing it? Taking into account, the top 15 funds across all equity categories across the past 3 years, we find that bets in particular cyclical stocks have paid off. Let us read about them in detail
- Financial sector:
14 of the top 15 equity mutual funds have financials or private banks as their top holding. Private banks have grown phenomenally at the expense of PSUs, even the non-banking finance companies or NBFCs are showing an upward tangent. Take the example of one of the multi cap toppers, Franklin India Prima Plus; it has given 119 per cent returns since the past three years and has increased its holdings in private banks to 26.5 percent from the previous 16.6 percent.
Private banks like Kotak Bank, Yes Bank and IndusInd have recorded high growths in the past three years. It is no surprise that top performers in mutual funds are increasing their holdings to these stocks. The other financials that have grown anywhere from 300 to an unbelievable 900 percent are financials like Manappuram Finance, Bajaj Finance, Cholamandalam Investment, GIC Housing Finance and Bajaj Finserv.
4 out of the top 5 large cap mutual funds have cement in their top holdings. Ditto for funds in multi cap space. SBI Blue Chip upped its cement holdings from 1.6 percent to 4. 5 percent between August 2013 and September 2016. Birla Sun Life Advantage did not have any holdings in the cement sector in August 2013, it pushed up the exposure to 6.5 percent in July 2016.
Cement companies are delivering high returns, with UltraTech delivering 152 percent, Shree Cement giving 350 percent and Orient Cement delivering 417 percent returns. Dalmia Bharat, on the other hand, has delivered a mesmerizing 1204 percent returns.
In 2013, automobiles and related auto parts were a skeptical sector with lukewarm demand, high fuel prices and high interest rates. Since then, the stocks of these companies have risen. Most top performing mutual funds have automobiles and auto ancillaries among their top 10 holdings, mostly at 4 to 16 percent range.
One of the favorite picks for most mutual fund toppers are Eicher Motors Ltd, which recorded a growth of 606 percent between August 2013 and July 2016. Another one is TVS motors with 855 percent returns in the same period. Tata Motors has also picked up and is focusing on domestic commercial vehicles.
- Refinery and Petroleum
Low crude oil prices have increased the growth of oil and petroleum companies. Between 2013 and 2016, Hindustan Petroleum grew by 650 percent and Bharat Petroleum by 337 percent. Even though stock prices are quite high, most large cap fund still continue to remain invested in this sector. SBI Magnum Multiplier, for instance, has 10 percent holding (its second largest holding) in refinery stocks.
In the next post, we will talk about sectors that top performing mutual funds have reduced their exposure to or dumped completely. Stay tuned!