Indian mutual funds seem to be stocking up on banks and financial sector stocks, and are cutting down on natural resource related sectors such as oil and gas and metals.
During April 2010, the total investment by domestic mutual funds in public sector banks increased by Rs 1,387 crore, says HDFC Securities.
The commercial vehicle sector was the other hot favourite, with a net investment of Rs 1,318 crore — nearly doubling the exposure of funds to the sector.
The new investments have come at the cost of the petroleum sector. The total investment by equity funds in oil sector — oil refining, drilling etc — dropped by almost Rs 1,200 crore over the same period.
Financial sector continues to be the favourite for funds. “Allocation to the financial sector is high because it accounts for almost one fourth of the total market capitalisation,” says Mr S. Naren, chief investment officer, ICICI Prudential.
He has a bias towards capital goods and software sectors as they have underperformed in the recent months, hrns.
The BSE metal index has fallen over 10 per cent since the beginning e says.
Capital goods companies have found favour with some of the other funds as well, as growth returns and companies start to invest again.
“We are positive on construction, capital goods and pharmaceuticals,” says Mr Ajay Argal of Birla Sunlife Mutual Fund.
Two sectors where the fund house has cut investment in the recent months include metals and oil & gas, the former largely on global concerns.
The BSE metal index has fallen over 10 per cent since the beginning of this month. Investors feel a financial crisis in Europe would have an immediate impact on metal demand and prices. Mutual funds also cut their exposure to the sector by almost Rs 250 crore.