NEW DELHI: A handful of index stocks might have anchored the recent market rally, but they are still not on top of the minds of big mutual funds and foreign portfolio investors.
The institutional categories are still light on these shares as their weightage in their combined portfolios remains low compared with the clout they enjoy in broader market indices such as MSCI India, BSE200 and Nifty50.
Data showed Reliance Industries, which recently became the first listed company to claim a m-cap of Rs 8,00,000 crore or above, had a 5.7 per cent weightage in FPIs’ total equity exposure in India as of June 30.
In comparison, the stock had 10.6 per cent weight in MSCI India index, 8.7 per cent in Nifty50 and 6.8 per cent in the BSE200 index.
In mutual fund portfolios, the RIL scrip accounted for 2.5 per cent of total equity holding, shows a study by Kotak Institutional Equities.
Infosys, India’s second largest IT firm, accounts for 4 per cent of FPIs’ equity investments in India. The stock enjoys 6.8 per cent weightage in BSE200 index and 7.2 per cent in MSCI India index.
FPI holding in TCS rose in last four quarters to 4.1 per cent (as of June 30) of their total equity holding. MF holding in the stock has risen to 1.8 per cent of their total India portfolio. But that still lags 5.6 per cent weightage the stock has in MSCI India, 4.5 per cent in Nifty50 and 3.4 per cent in the BSE200 indices.
Kotak Mahindra Bank and Hindustan Unilever have similar stories.
This aberration was observed at a time when only 17 stocks from the Nifty50 pack and eight from the Sensex pack have outperformed the benchmark index in last one year.
The more the number of stocks in an index, the weaker is its performance. This, the Kotak Institutional Equities note suggests, is antithesis of investment management, which says portfolio diversification is a must to reduce risks.
“The lopsided performance of the benchmark indices over the past 12 months supported by a handful of stocks and low overall positions of FPIs and MFs on these counters would suggest most actively managed funds would have trailed the market indices in performance,” it said.
This may be a good wake-up call for the industry to review the relevance of the benchmarks in achieving financial security objectives of households/retail investors, the Kotak report said.
Data suggests largecap mutual funds have generated 14 per cent returns in last one year compared with a 21 per cent rise in the BSE Sensex. Multicap funds, on an average, generated 10 per cent.
What’s driving heavyweights?
The strong performance of most of the outperforming stocks reflects the market’s changed view on them, led by weak macros (IT, pharmaceuticals) and narratives (consumption stocks, RIL), the brokerage said.
“The performance of the Indian market in local currency terms has been supported largely by the strong performance of IT stocks, which in turn have performed as a result of the deterioration in macros and the resultant sharp depreciation in the rupee,” the brokerage said.
The BSE Sensex is up 12 per cent so far in 2018, but a mere 0.12 per cent in dollar terms.
© copyright — The Economic Times