Mumbai: Despite a rise of 21.35% in July and multi-billion deals with global tech giants and investors, Reliance Industries Ltd was the most sold stock by mutual funds in the month as equity schemes’ inflows turned negative for the first time in four years. Mutual fund equity schemes sold Reliance Industries’ shares worth ₹6,674 crore in July, according to data sourced from Edelweiss Alternative Research and ACE MF.
According to analysts, fund managers opted to book profit following the robust rally in the stock. They said that there was a tactical shift in the investor portfolio from Reliance Industries to the partly paid rights shares, which are trading simultaneously. Extreme exuberance for the company has driven stock prices to record high in July as it jumped over 100% from the lows it witnessed in March. The stock has risen 41% in this year so far, outpacing benchmark indices.
However, despite the sell-off by equity funds in July, RIL is still in one of the top 10 holdings by almost all mutual fund houses. Among major asset management companies (AMCs) RIL is one of the top ten holdings for Aditya Birla Sun Life AMC, Axis Mutual Fund, HDFC MF, ICICI Prudential MF, IDFC MF, Invesco MF, Kotak MF, State Bank of India MF, UTI MF and Motilal Oswal MF, according to Edelweiss Alternative Research and ACE MF data.
In July, RIL shares were downgraded by few analysts citing steep valuations after a robust rally. However, despite the cut in ratings foreign brokerage firms CLSA and Goldman Sachs said the stock will see upside to the current price. While downgrading its rating from ‘outperform’ to ‘buy’, CLSA analysts said while its long-term promise and underweight position in portfolios may support the stock price, large valuation surprises may be difficult in the near term.
Meanwhile, other stocks which were sold most by mutual fund schemes in July included HDFC Bank and HDFC with an outflow of ₹2,072 crore and ₹1,546 crore, respectively. Among large caps, Axis Bank, Bharti Airtel and Hindustan Unilever also saw cut in exposure by equity mutual fund schemes in July.
Technology major Tata Consultancy Services was the most bought stock in July with an inflow of ₹886 crore followed by PI Industries, ACC, Page Industries and Balkrishna Industries.
Equity mutual funds saw the first monthly net outflow of ₹2,480.35 crore in four years in July due to higher redemptions or profit booking as markets rebounded sharply after the covid-led crash. The systematic investment plans’ (SIPs) inflows declined to 22-month low in July at ₹ ₹7,830.6 crore.
“Investors tend to book profit and make a temporary exit as markets inch up to higher levels. Also, the disconnect in the markets and macro picture and likely fall in household cashflows resulted in some profit booking,” said HDFC Securities Ltd.