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HDFC Mutual Fund dumps high-flying stocks to pick laggards


NEW DELHI: HDFC Mutual Fund lapped up select underperformers from the mining, FMCG and power sectors during the November market rally that lifted BSE benchmark Sensex 11 per cent to 44,150, on firm global cues, sustained inflows from foreign institutional investors and progress on Covid-19 vaccine.

Investment managers led by Prashant Jain at the country’s second-largest money manager increased exposure to Coal India, whose shares are down 1.30 per cent since the beginning of this financial year. It bought nearly 80 lakh shares in the world’s single largest coal producer last month.

The fund house also picked over 40 lakh shares each in REC and ITC. Shares of the former have gained 53 per cent to Rs 136 as of December 11 from Rs 88 on March 31, while those of the latter have risen nearly 26 per cent to Rs 216. The 30-share Sensex has added 56.40 per cent during the same period.

Global brokerage Jefferies is bullish on ITC with a price target of Rs 265. “Given the Covid-related concerns, we find consumer staple firms relatively better placed given the defensive nature of the business. Businesses with strong cash flows and robust balance sheets may be preferred during this period of disruption,” it said.

The fund house further raised its holdings in outperformers such as Sun Pharmaceuticals, GAIL (India), The Federal Bank, Jamna Auto, Hindalco, Vedanta, Lupin, HCL Technologies, Rain Industries and Hindustan Aeronautics, among others. Shares of these companies have gained 55-155 per cent since April 1.

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Meanwhile, the fund house sold more than 1 crore shares each in ICICI Bank, Ambuja Cement, Tata Steel, PNB and Power Grid and offloaded more than 50 lakh shares each in BPCL, NHPC, NTPC and SBI.

Sectorwise, the fund house bought additional 1 lakh shares of Bank of Baroda and IDFC First Bank from the banking space. In auto, it picked more than 13,000 shares of Bajaj Auto, 60,000 shares of Maruti Suzuki and 2.46 lakh shares of M&M.

Bharti Airtel, GHCL, United Spirits, Siemens, DLF, Endurance Technologies, Phoenix Mills, Transport Corporation of India, Cadila Healthcare, Bharat Dynamics, The Great Eastern Shipping, Adani Ports, Radico Khaitan, Mishra Dhatu Nigam, Mphasis, Titan and L&T Technology Services are among other stocks where HDFC AMC bought 1-5 lakh additional shares in November.

Of late, realty stocks have been on the radar of investors and analysts. “While demand is recovering in some pockets on a low base, we believe absorption and supply at the industry level will remain subdued and cash flow issues will worsen,” Edelweiss Securities said in a report.

It said developers with strong brand reputations and low leverage are best placed to survive the turmoil.

Overall, HDFC AMC raised exposure to at least 76 stocks during the month, but cut it in 92 others, data available with Ace Mutual Fund showed. Some of this buying or selling may have been done for the AMC’s passively-managed index funds.

In the broader market, the fund house completely exited Bata India, Colgate-Palmolive, Nalco, Nila Infra and VIP Industries. Its fresh buys during the month included Ashok Leyland, Dabur India, Mindspace Business Park REIT, Sun TV Network, The Ramco Cement and Torrent Power.

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Ambit Capital is positive on Ashok Leyland with a price target of Rs 128. “Among the commercial vehicles (CV) OEMs, we prefer Ashok Leyland to Tata Motors, as the former is a pure-play domestic CV maker with a cleaner balance sheet, lower capex needs and facing limited competitive intensity. Though Ashok Leyland has moved up about 80 per cent in last six months, we believe it is just the initial rally for a four-year extended upcycle after around 70 per cent decline during FY20-21E,” Ambit said. It also has ‘buy’ ratings on Maruti Suzuki with a price target of Rs 8,677.





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