Mutual funds sharply increased their stakes in several midcap stocks last month, with Patanjali Foods leading the pack after a 27.8% jump in holdings, according to a fund folio report.
The surge in buying was part of a broader shift in sector preferences, as fund managers favored capital goods and utilities while pulling back from technology and private banks.
Midcap stocks saw the biggest inflows
Patanjali Foods topped the list of midcap stocks with the highest month-on-month net buying in April, the report noted. Other stocks that saw significant inflows included 360 One WAM, NALCO, SAIL, and IREDA.
Suzlon Energy saw its mutual fund holdings rise by 6% during the same period. The buying spree reflected a broader trend of fund managers seeking growth outside large-cap stocks, particularly in sectors tied to infrastructure and domestic consumption.
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While midcaps drew attention, mutual funds also increased their exposure to select large-cap names. Adani Enterprises emerged as a standout in the Nifty 500 segment, with a 17.9% rise in mutual fund holdings. Other top picks included Max Healthcare, HDFC Life, and Sun Pharma.
Sector shifts reveal changing priorities
Capital goods and utilities saw the largest increase in mutual fund allocations, reaching multi-month highs. The report highlighted that exposure to non-banking financial companies (NBFCs) in the non-lending segment hit a record share within diversified equity portfolios.
In contrast, fund managers reduced their stakes in technology, private banks, healthcare, and oil and gas. The shift suggested a strategic pivot toward sectors expected to benefit from government spending and economic recovery, while trimming positions in areas facing regulatory or competitive pressures.
Compared to the BSE-200 index, mutual funds held at least 1% less in oil and gas, consumer staples, utilities, and private banks. However, they maintained an overweight position in NBFCs, healthcare, consumer durables, capital goods, and chemicals.
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The divergence in sector allocations—where utilities saw both increased exposure and relative underweighting—hinted at a subtle approach. Fund managers appeared to be balancing high-growth themes with defensive plays, even as market conditions remained volatile.
For now, the focus on midcaps and select large-caps suggests confidence in India’s domestic growth story, though the uneven sector bets indicate caution about global headwinds.
The report did not specify whether the buying was driven by new inflows or reallocation within existing portfolios. Still, the trend shows how fund managers are handling a market where valuations in traditional safe havens have become stretched.
ICICI Bank and SBI led the large-cap segment in terms of value increase, followed by Larsen & Toubro and HDFC Bank. The concentration of buying in financials and industrials reflected a bet on cyclical recovery, though the broader market remains divided on the pace of that rebound.
