Most mutual funds follow a bottom up approach while selecting stocks. But at this point of time, fund managers are being careful in choosing stocks. They are betting on sectors that have been stable in performance and are expected to see good growth in earnings and profits going forward. During the last two years, COVID-19 has caused havoc all over the world. It has also changed the way companies do business. In this situation many new sectors have come in limelight while many sectors have come to the floor. Here we are telling about 6 such sectors in which mutual funds are buying. The figures given in this story are as of 31 August 2021.
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Banking is currently the preferred sector of mutual funds. About 1/5 of the industry AUM is in this sector. In the last two decades, this sector has seen more growth than India’s GDP. ICICI Bank, HDFC Bank, State Bank of India, Axis Bank and Kotak Mahindra Bank are among the top 5 banking stocks in the holdings of mutual funds.
Software companies are in focus amid rising spending on technology and digitalisation. In view of this, MF buying is being seen in Infosys, Tata Consultancy Services, HCL Technologies, Tech Mahindra and Info Edge (India).
Insurance companies and non-bank firms also occupy a good place in the shopping list of mutual funds. Mutual funds have seen strong buying in HDFC Ltd, Bajaj Finance, SBI Life Insurance Company, Bajaj Finserv and Max Financial Services.
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MFs are also bullish on FMCG, which is known as the defensive sector. ITC, Hindustan Unilever, Asian Paints, Nestle India and Tata Consumer Products are among the preferred stocks from MFs in this sector.
The time between 2015 and 2020 was a difficult time for Indian pharma companies. However, due to the increase in the demand for some medicines in the era of Covid-19, there was a boom in pharma companies. The preferred stocks from MFs in this sector include Sun Pharmaceutical Industries, Divis Laboratories, Cipla, Dr. Reddys Laboratories and Ipca Laboratories.
Some stocks in the petroleum products sector also figure in the fund managers’ favorites list. These include the names of Reliance Industries, Bharat Petroleum Corporation, Hindustan Petroleum Corporation, Indian Oil Corporation and Castrol India.
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