NEW DELHI: Mutual fund managers seem to be bottom fishing for stocks, suggests the latest data as their top bets last month included many beaten-down counters. Among the 30 top picks of mutual funds in December across market cap, 19 have given negative returns to the tune of 6-60% in the last one year.
Interestingly, of these 19 stocks, seven that are in bear grip have also formed part of domestic institutional investors’ top picks. These include FSN E-Commerce Ventures (
), , , , LTIMindtree, and .
It seems the institutions are trying to bring their average price down as most of the stocks they have been buying have been underperformers and more importantly, the outlook does not give many reasons for a fresh buy, independent market expert Ambareesh Baliga told ETMarkets.com.
“Nykaa has disappointed investors with their performance and more recently with certain corporate actions which border on governance questionability.
, too, falls in the same basket and was anyways an overhyped and expensive IPO. Vodafone now seems to be in the sunset zone and LTI, too, does not enthuse confidence among the IT sector stocks. The only ones which seem worthwhile are PB Fintech and IRCTC in this whole pack,” Baliga added.
The new-age counters — Nykaa, Paytm and PB Fintech — have lost between 40-60% in the last one year as tightening liquidity conditions dented demand for expensive growth stocks while concerns around profitability further dented their appeal. MFs held 1,215 lakh Nykaa shares worth Rs 1,881 crore in December as against 1,635 lakh shares worth Rs 949 crore in November. MFs bought 18 lakh shares of Paytm and 37 lakh shares of PB Fintech last month.
Meanwhile, they bought 644 lakh Voda Idea shares while their total holding in December was worth Rs 280 crore. This stock has cracked over 43% in last one year.
Often touted as “smart money”, the question remains if their shareholding pattern holds cues for retail investors.
Commenting on the outlook for these stocks, Kranthi Bathini said stocks like LTIMindtree and IRCTC might be underperforming over some time but they offer a lot of margin of safety. “This could also be a rationale that may have influenced fund managers to pick stake in these counters,” Bathini told ETMarkets.com.
As for the new-age tech stocks, Bathini believes that investors need to see when these companies become profitable. “Investors can wait and see how revenues are growing but ultimately their profitability matters. Once these companies become profitable, investors can pick these stocks,” he said.
“Among the new age companies, those which are on track to be cash positive are the ones which will enthuse interest. And those which are cash positive like Nykaa, whose IPO was based on that premise, need to scale up faster, and that growth should also reflect in the bottomline,” said Baliga.
(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of Economic Times)