Adani stocks among Nifty counters that saw highest buying by MFs last month

NEW DELHI: Unperturbed by the ongoing investigation by a Supreme Court appointed committee and market regulator Sebi on the Hindenburg issue, mutual funds were seen buying stakes of several Adani Group companies in May.

Embattled billionaire Gautam Adani's flagship entity Adani Enterprises saw the highest month-on-month buying at 16.8% with Kotak Mahindra Mutual Fund, Invesco and NJ Mutual Fund. Latest data from Motilal Oswal shows that at least 17 mutual funds hold exposure in the multibagger Nifty stock that is up over 1200% in the last 3 years.

The data include purchases of Adani stocks by actively-managed schemes, ETFs, index funds and arbitrage schemes. When a stock is part of an index, passively managed schemes like ETFs and index funds that mirror such indexes end up buying it.

Adani Ports also saw fund managers MF holdings inching higher by 2.6% month-on-month in April.

Other Nifty stocks that saw highest buying include Cipla, Tata Motors, HUL, Infosys, NTPC, Tata Consumer and Bajaj Finance.

Among other Adani stocks, the Ahmedabad-based conglomerate's FMCG arm Adani Wilmar saw the entry of Kotak Mahindra Mutual Fund, LIC Mutual Fund and Sundaram. Even after a 32% correction in the last one year, the stock is still trading at an expensive valuation of around 86 times PE.

Shares of Adani Total Gas, which have lost 67% in the last one year, saw the exit of Nippon India Mutual Fund.

The group's cement arm ACC saw the exit of Baroda BNP Paribas Mutual Fund and ITI while JM Financial and Franklin Templeton were seen on the buying side. In the case of Ambuja Cements, Invesco and Baroda BNP Paribas showed buying interest.

What should investors do?
While the chances of the pressure on Adani stocks lifting anytime soon till the regulatory overhang gets over are bleak, financials are turning out to be top favourites.

April saw mutual funds raising weights of NBFCs, automobiles, capital goods, PSU banks, telecom, and infrastructure, while moderating the weights of technology, healthcare, cement, retail, and insurance.

"We like private sector banks like Axis Bank, Kotak Mahindra and HDFC Bank. Most of them are trading near their 5- or 10-year lowest price-to-book ratio levels despite the recent rally. We believe private banks offer an excellent value buying opportunity at this stage," said Apurva Sheth of SAMCO Securities.

Kotak Institutional Equities' Sanjeev Prasad agrees saying financials remain reasonably valued and appear attractive in the context of a likely healthy credit cycle over the next 1-2 years.

"Most growth stocks, especially in consumption, investment and outsourcing space, are trading at expensive valuations, despite increasing near-term demand issues and medium-term disruption risk," he said.

March quarter shareholding pattern of BSE500 companies shows that FIIs are geared into a cyclical upturn with an overweight stance on financials, industrials and property being further strengthened. " IT is now the biggest underweight sector for FIIs, though domestic MF positioning is closer to neutral. Common underweight position in our preferred sector is in consumer staples; partly explaining the catch-up rally since early April," Jefferies said.

On the back of over Rs 25,000 crore buying by FIIs so far in the month of April, Nifty has been on a gaining spree and has rallied over 3% in the last one month.

(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of Economic Times)