Leading fund houses lap up IT and pharma stocks in September

As the Sensex and Nifty maintained its winning streak, mutual fund managers in September focused on themes with earnings predictability. Leading fund houses raised their holdings in recent outperformers– technology and healthcare– to the highest in recent times. According to an analysis of domestic brokerage Motilal Oswal, Indian mutual funds’ exposure to technology stocks rose to a two-year high at 11.6% in September. Similarly, the industry’s exposure to healthcare sector companies was at four-and-a-half-year peak of 8.7% as on September 30. ET takes a look at some of the notable portfolio changes of top ten fund houses by Asset Under Management.


Dr Reddy’s Laboratories

Market cap: Rs 85,141 crore

CMP: Rs 5,121

Bought by: Aditya Birla Sun Life

A few factors have attracted managers’ attention to the company’s stock. These are cost control, multiple partnerships for COVID-19 products, increasing benefits of higher primary sales arising out acquisition of Wockhardt, launch of Remdesivir, anti-viral medicine and increasing launches of COVID-19 products in the US and other overseas markets and other product-specific opportunities point to strong revenue growth for the company in the present fiscal. Analysts estimated 28-37% growth in the company’s earnings per share (EPS) for the present and the next fiscal. For investors, an important thing to note is the company’s valuation was quite attractive in the first week of September which rose in the subsequent weeks and steadied till the end of the month.

Tata Consultancy Services (TCS)

Market Capitalisation: Rs 10,54,345 crore

CMP: Rs 2809

Bought by: SBI MF

There are two important reasons why Tata Consultancy Services (TCS) received high attention of fund managers. One, the earnings’ commentary of the company was quite upbeat. This fact when seen in the context of the favourable earnings’ situation of the sector itself added to the attractiveness of bellwether company TCS. Besides this, the company’s valuation was quite attractive enough in the beginning of the September which managers found it as an irresistible buy. Analysts had already upgraded their estimates of earnings per share (EPS) of the company in the range of 15-34% for FY22 and FY23 respectively.

Mphasis

Market cap: Rs 26,570 crore

CMP: Rs 1424

Bought by: Franklin Templeton

With 60% revenues coming in from BFSI space, the company is relatively well place in the Covid 19 pandemic. Analysts like this for its higher growth in the digital technology space. It is consistently winning large deals in greater than US$20 million category which analysts believe augurs well for the company’s revenue growth trajectory. They expect improvement in margins in coming quarters led by cost rationalisation and improvement in revenues. A healthy balance sheet could help the company in inorganic revenue growth opportunities.

Zydus Wellness

Market Cap: Rs 11,575 crore

CMP: Rs 1,819

Bought by: Kotak Mutual Fund

Analysts expect a double digit revenue growth over the next three years led by the larger verticals of Glucon-D, Complan, Sugar Free driven by the new innovative products launches. The margins will improve with merger synergy and operational efficiency. New launches over the last two or three years such as Sugar free Green & SugarLite in the artificial sweeteners segment, entry into tan removal & face wash in the facial care segment and launch of mayonnaise in the Nutralite segment will aid growth.