Follow the leaders. Invest like they did in June

The Indian mutual fund industry in June saw an erosion of 7.5 per cent in its assets under management (AUM). AUMs reflect the total amount of money that all the mutual fund houses, together, collect from the public.

This indicates that there was very little pressure on the mutual funds in terms of investors selling their units and taking back their money even after markets falling continuously. During the month under consideration (June 2 to June 30) the benchmark BSE 30 Sensex lost 16 per cent or 2,570. The Sensex was trading at 16,063 points on June 2 and crashed to 13,461 points on June 30 the last trading day of the month.

In fact, all the mutual funds put together bought shares worth Rs 3,187 crore in the month of June indicating that they were buying heavily even as the markets were falling. Clearly, an indication that they were finding a lot of value in the Indian stock market.  

Interestingly, in a sign that mutual fund investors think long term and are not affected by short-term blips, funds like ABN Amro, DBS Chola and Fidelity -- all managed by expert fund managers -- gained in terms of AUMs by 15 per cent, seven per cent and two per cent respectively. On the other hand we saw the corpus of Tata AIG Mutual Fund falling by a whopping 22 per cent. Barring Tata AIG, most other mutual funds saw a good amount of addition to their AUMs.

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If we have to look at stocks specifically then Piramal Healthcare, a pharmaceutical company that is supposed to be a defensive stock in such volatile times, has been the darling of the month. As many as 10 mutual funds bought 44,40,259 shares of the company in the previous month.

The other stocks that found favour with mutual funds are Aban Lloyd Chiles Offshore (bought by six funds), Reliance Infrastructure (bought by five funds), and Spice Communications and Sundaram Clayton (each bought by four funds apiece).

In terms of highest quantity of stocks bought by AMCs Mukesh Ambani led Reliance Petroleum has won the race with 62,38,923 shares being picked up by mutual funds. Incidentally, the company is in the news as it has completed 94 per cent of its 100-per-cent-export-oriented refinery at Jamnagar in Gujarat. Once operational, the company will refine 5,80,000 barrels of crude every day.

Interestingly, corporate wars/family feuds apart, Anil Ambani-owned Reliance Mutual Fund was one of the top three funds that lapped up Reliance Petroleum in June. The other two funds were DSP Merrill Lynch and Sundaram BNP Paribas.

The other stocks that found favour were Development Credit Bank, IFCI and Ashok Leyland.

Now, let's have a look at what the mutual funds sold in the month of June.

As many as eight AMCs removed Nicholas Piramal (not to be confused with Piramal Healthcare; they are two separate companies) from their portfolio. NDTV and Tata Tea were sold by five AMCs each. Centurion Bank on Punjab was also sold as mutual funds feared that high interest rates and high inflation will affect the company's profits in the next six months.

The top five stocks sold in terms of quantity were Centurion Bank of Punjab, Nicholas Piramal India, Chambal Fertilisers, Geojit Financial Services and Carborundum Universal as shown in the table below.

Centurion Bank of Punjab was one of the most heavily sold stocks by mutual funds about. About 2.3 crore shares were sold by four AMCs namely Birla Sun Life, Franklin Templeton, ICICI Pru, and Kotak. And 42 lakh shares of Nicholas Piramal shares were sold by mutual fund houses.

Key points

• Piramal Healthcare is a good buy according to 10 fund houses out of the 31 fund houses in the Indian mutual fund industry
• DSP Merrill Lynch, Reliance Mutual Fund and Sundaram BNP Paribas consider Reliance Petroleum as a good pick