Mutual Funds Shift Focus To Tech, Auto And E-Commerce Stocks In July

Mutual fund portfolios saw notable changes in sector allocation during July as investors increased exposure to technology, automobiles and e-commerce. The changes came alongside a 2.2% rise in the Nifty, which ended the month at 24,384.

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Technology Allocation Rebounds

Technology recorded one of the sharper increases in mutual fund allocation during the month. Its portfolio weight rose 70 basis points to 6.6% in July from 5.9% in June, according to Motilal Oswal Financial Services.

The increase followed a decline in June, when technology allocation had reached an all-time low. Despite the monthly recovery, the sector’s weight remained 140 basis points below its level a year earlier.

Automobile stocks also continued to attract higher allocation. The sector’s weight increased by 30 basis points to 8.9%, marking the third consecutive monthly rise. Its allocation was 80 basis points higher than in July last year.
E-commerce recorded its third straight monthly increase, with its portfolio weight rising 30 basis points to 3.1%.

The allocation reached an all-time high and was 80 basis points above the year-ago level.
Healthcare, NBFC lending and telecom were among the other sectors where mutual funds increased their exposure.

Private Banks, Capital Goods See Lower Allocation

Private banks remained the largest sector allocation in mutual fund portfolios, but their weight fell 50 basis points to 17.4% in July. The sector’s allocation was also 50 basis points lower than a year earlier.

Capital goods saw its allocation decline after reaching a 24-month high of 8.1% in June. Its weight dropped 50 basis points to 7.6% in July, although it remained 30 basis points above the year-ago level.

Mutual funds also reduced allocations to utilities, oil and gas, PSU banks, retail, insurance and consumer durables during the month.

NBFCs, Healthcare Among Key Overweight Sectors

Compared with the BSE 200, NBFC non-lending and healthcare had the highest number of mutual funds overweight by at least 1 percentage point, with 15 funds each.

E-commerce followed with 10 funds, while capital goods and chemicals had nine funds each overweight. Oil and gas recorded the highest number of funds underweight by at least 1 percentage point, at 19. Private banks followed with 15 funds. Consumer, PSU banks and utilities were underweight at 14, 12 and 11 funds, respectively.

Bharti Airtel, Infosys See Higher MF Holdings

At the stock level, Bharti Airtel recorded the largest month-on-month increase in the value of mutual fund holdings in July, followed by Infosys, Bajaj Finance, ICICI Bank, M&M, Eternal, TCS, Torrent Pharma, HCL Technologies and Adani Enterprises.

HDFC Bank recorded the biggest decline in mutual fund holdings during the month. Axis Bank, L&T, Varun Beverages, Trent, Bharat Electronics, Dr Reddy’s Laboratories, Avenue Supermarts, Bank of Baroda and NTPC were among the other stocks that saw notable reductions.

Equity Inflows Moderate In July

Equity scheme sales increased 2.3% month-on-month to ₹79,800 crore, while redemptions rose 9.1% to ₹53,600 crore. Net equity inflows consequently declined to ₹26,200 crore in July from ₹28,900 crore in June.
SIP contributions remained steady at ₹31,960 crore, increasing 0.6% from June and 12.3% from a year earlier.