Mutual Funds Sell-Off in December
Mutual funds repositioned their portfolios, investing more in defensives such as healthcare, consumer discretionary, and IT and reducing exposure to sectors such as financials, commodities, and industrials. This repositioning led to a huge selling of well-known stocks such as HDFC Bank, ITC, Titan, and Swiggy, among public sector entities such as REC and HAL.
HDFC Bank was the most sold among all. The shares have declined by around 2% over the year, and mutual funds sold almost Rs.1,290 crore of its shares. Other sales that exceeded Rs.1,000 crore included Samvardhana Motherson. HAL, ITC, and Titan also saw sell-offs by the mutual fund entity for at least Rs. 900 crore.
Other known stocks sold were Swiggy, TCS, Bajaj Finance, REC, and Bajaj Auto. The top ten sold stocks comprised a total sell-off valued over $1 billion.
On the buying side, Reliance Industries was the top pick, with mutual funds investing an estimated Rs.5,700 crore in the company. Newly listed Vishal Mega Mart attracted significant investments worth Rs.4,200 crore. Other preferred stocks included Axis Bank, Torrent Power, Zomato, Cipla, PG Electroplast, Jio Financial, and Sai Life Sciences.
Public sector banks also garnered interest, with SBI, Union Bank, Bank of Baroda, Punjab National Bank, and Indian Bank being among the top picks.
Despite headwinds such as slowing earnings growth, subdued consumption, rupee depreciation, and lackluster capital expenditure, these challenges are seen as transitory. Domestic demand, political stability, reforms, healthy corporate finances, and controlled deficits are driving India’s economic growth, positioning the economy for sustainable growth.
The key sectoral areas will be growth-led in 2025 led by the Healthcare, IT sectors, and improving financial services with 19.9 per cent in health care led mainly by an improvement in the rise in demand of specialized products/services, while for IT 12.9, supported by advancing AI, further recovery in worldwide markets; in this sector private banking and NBFC financials, among others, to perform better under attractive valuations and the raising credit demand going forward.
Large-cap stocks are expected to perform better because of their valuation comfort, although corporate earnings and GDP growth have been subdued lately. In the long term, stock returns are expected to align with earnings growth. Small-cap stocks, however, seem to have surged ahead of their earnings potential in several segments.
Experts suggest lump-sum investments in hybrid equity-oriented funds for investors with lower equity exposure. For pure equity investments, a staggered approach over six months is recommended, with faster deployment in case of significant market corrections.
The recent portfolio rebalancing of mutual funds shows a strategic change in favor of growing opportunities and risk management. Investors should hold a medium to long-term view and maintain a strategy with high-quality growth-oriented companies as well as balance the overall strategy.
