Mutual funds find banks, cap goods red-hot

Top six mutual fund (MF) houses such as HDFC AMC, ICICI Pru AMC, Reliance MF, Birla Sun Life AMC, UTI AMC and SBI Funds Management, which together hold over 60% market share, have bought interest rate-sensitive stocks such as State Bank of India and ICICI Bank, apart from capital goods stocks like L&T, in October in anticipation of a rate cut by the Reserve Bank of India (RBI), which may trigger a rally in such sectors. Funds houses have selectively sold shares in sectors such as technology and FMCG after some disappointment in earnings in the September quarter.

Meanwhile, rate-sensitive sectors such as capital goods, banks, NBFCs and real estate have gained the most over the past one month. The ET Capital Goods Index has rallied 10.68%, ET Banks Index is up 10.9%, and ET Realty has gained 10.14% during this period. These have also outperformed the benchmark index, BSE Sensex, by a wide margin, which has jumped 5.8% over the same period.

“Our view has been that it may be a while before RBI considers monetary easing. Looking at the consumer inflation, the global environment, views from members of monetary policy advisory panel and actions by the government as outlined above, the possibility of RBI softening its stance has gone up,” said Navneet Munot, chief investment officer at SBI MF.