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MF schemes: Skewed, concentrated and similar

Moneylife’s study of the pattern of stock picks by mutual funds’ equity schemes finds that stock picks are highly concentrated among a few hundreds with portfolios mimicking each other.
The study also underlines the lack of depth and diversity in Indian markets There are 1,477 stocks listed on the National Stock Exchange and 4,946 stocks listed on the Bombay Stock Exchange, but mutual funds find only a few hundred of them as investment-worthy. Moneylife’s analysis of equity diversified schemes of mutual funds as on December 2009 shows that 203 schemes of mutual funds have just 659 stocks in them. The other key findings of the study are:
 Funds are mimicking each other’s portfolios. Just a handful of large-cap stocks are present in most of the funds. At the top of this list of fancied stocks as on 31 December 2009 is ICICI Bank, which appears in 130 schemes across 203 equity diversified growth schemes. This is followed by Reliance Industries and Infosys Technologies, which have made an appearance in 125 and 120 schemes respectively. Oil and Natural Gas Corporation (ONGC) and State Bank of India (SBI) round up the top-5 popular stocks. Of the 203 schemes, 113 currently have exposure to ONGC, followed by SBI which is a favourite among 108 schemes.

 Most schemes are dominated by mega-cap and large-cap stocks. Of the 659 companies, ITC, Bharti Airtel, Larsen & Toubro, Tata Consultancy Services and Bharat Heavy Electricals are also among the top 10 popular stocks. Banking and engineering sector companies are currently among the favourites of most equity diversified schemes.

 The companies that found the least preference with equity schemes include Gayatri Projects, Great Offshore, JK Lakshmi Cement, Mahanagar Telephone Nigam Ltd (MTNL) and National Aluminium Company (NALCO).

 Our study also finds that within these 659 companies, 434 companies make an appearance in 10 or fewer equity schemes; clearly, in that case, the investible sphere shrinks further to a mere 250-odd stocks. Of the remaining 225 companies in the fund portfolios, only 39 companies appear 50 or more times, while the number of companies appearing in 25 or more schemes are a little over 100. This is further evidence of the concentrated and highly skewed nature of stock picks across fund schemes.

 The skew of the fund is evidenced by the fact that of the 659 companies in the fund portfolio, 168 stocks appear in a single scheme and 71 stocks appear in two schemes.

 A total of 203 schemes had 8,542 stocks in all schemes put together. Therefore, the average portfolio size is of 42 stocks and yet the total universe of unique stocks was 659.

 The fact that only 659 companies make up the portfolio across 203 equity diversified growth schemes underlines the apparent lack of depth and diversity in Indian capital markets.

In short, after seven years of robust economic growth in all segments and sectors; a long bull run and a plethora of initial public offerings (IPOs), Indian mutual funds have a very small list of stocks to buy from. They prefer to buy the same stocks and have your money concentrated on a few large-cap stocks.

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    Alok Bhola

    1 decade ago

    Anybody who knows anything about the Indian stock market should already know that even though total listed stocks number about 5000, there is no meaningful liquidity beyond top 600 - 700 stocks. Quite a few of the remaining are not even traded daily. Hence its not feasible for Mutual Funds to invest outside the universe of top 700 or so stocks.
    Further, no more that 100 stocks can be classified as large cap even by Indian standards. Hence, large cap oriented funds have their options limited to these 100 stocks anyways.
    Hence, the reason for the relatively smaller investment universe is inadequate availability more than anything else.


    1 decade ago

    Thanks good and useful analysis. Definitely our equity markets lack depth, if the fund managers are not ready to take risk what can we expect from an individual investor, this also shows HOW MUCH FUNDS MANAGERS WORK ;-)
    (just sticking to safe havens). Even most of the financial newspapers and magazines are merely wasting ink by typing just the news. NO ANALYSIS or fresh ideas, or original articles.


    1 decade ago

    Then he does not have to do much use of his s.picking skills. If u see what these so called MF experts, as we are made to believe, have delivered in last ten years. If I have remained a passive investor, my returns are more than theirs. Therefore I say thank u Sir. - Borkar


    1 decade ago

    this is absolutely true-fund managers act as mere brokers for few stock to pile in few amc's-this does not show their experstise-portfolios r mere duplications for many funds-so called expert fund managers just cant find right sectors or right stocks-may be due to lack of will or some hidden reason?


    1 decade ago

    So, the obvious conclusion seems to be that most fund managers are conservative and pick the most stable stocks. No wild flights. So, what's the problem with that? As a retired person with limited capital, I prefer it this way with regard to my own portfolio of mutual funds.
    Or have I missed the point? The article has just stated a fact. It has not said that what was happening was wrong and, if so, why it was wrong.

    Technology via SMS becomes a helping hand for Haiti victims

    The US government has got major mobile operators on board to allow people to very easily donate $10, through a text message to the Red Cross, to help with the disastrous situation in Haiti following the major earthquake

    Setting a good example of using technology as a helping hand, the Obama administration has come out with an extremely simple—but fantastic idea. Anyone from the US, who wants to contribute to the victims of Haiti, can do so, simply by using a mobile handset.

    The Obama administration has set up a unique number ‘90999’ to receive the $10 donation. The government has got major US carriers on board to allow people to very easily donate $10 to the Red Cross to help with the disastrous situation in Haiti following the major earthquake.

    Till today, the SMSs have raised $5.20 million from over 5.2 lakh mobile phone users. Users based in the US just have to type ‘HAITI’ and send the message to 90999 to donate the amount. Users will be charged this amount in their next billing cycle.

    According to, this texting drive, being run through mGive, a non-profit organisation working with the Red Cross, is also leveraging Twitter and Facebook to help get the word out there. Donations are said to be coming in to the tune of $200,000 each hour, so they are very likely coming close to $6 million raised at this point, it added.

    Although there may be some questions regarding the utilisation of this fund, when it comes to providing help and support for any disaster victim across the world, no organisation does it better than the Red Cross. The initiative by the Obama administration is surely noteworthy, especially for countries like India, where there is hardly any information available about funds collection for any natural disaster and the details of the actual utilisation of these amounts.

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    Stocks close higher on strong global cues

    Sensex gains 75 points as RIL, ONGC move up; bank stocks decline on continuing concerns of a rate hike

    Trading started on a high note on Thursday, triggered by Asian stocks which rebounded after a sharp decline yesterday in a knee-jerk reaction to the increase in the cash reserve ratio for Chinese banks. But after a robust opening, the market was sold off until it firmed up after the European market opened strong. The day ended with a gain of 75 points in the Sensex which closed at 17,585. The index touched a high of 17,628 and a low of 17,525 during the session. The NSE Nifty ended at a provisional 5,259 points, up 0.48% or 25 points. The premarket futures in US are trading higher, as are European markets. Higher prices seem to be the path of least resistance.

    Asian stocks were higher following a higher close in US stocks on Wednesday. The Dow Jones Industrial Average hit a fresh 15-month closing high, gaining 53 points. The Standard & Poor's 500 Index gained 9.46 points and the Nasdaq Composite Index was up 25 points, or 1.12%, to 2,307.90.

    Among Indian stocks, Punj Lloyd has secured a Rs574 crore offshore EPC contract from PTT Public Company Ltd, a Thailand state-owned oil and gas major, for platform compression facilities in the Gulf of Thailand. The stock was up nearly 2% at Rs216.50. 

    Infosys was up for the fourth consecutive day while TCS was down. Wipro was up 3.61%.

    The market was propped up by a rise in two heavyweights—RIL and ONGC. RIL rose 2.26% after it announced raising $763 million through a block sale of 3.3 crore shares on Monday.

    BHEL (up 1.89%) has received a Rs200-crore order from PowerGrid for supplying insulators needed in transmission lines.

    Bank stocks were down on continuing concerns of a rate hike.

    The surprise of the day was that oil marketing companies (OMCs) did not get sold off and ONGC was actually up 2.94%, despite the petroleum minister Murli Deora stating that the FM has not agreed to the demand of Rs31,800 crore of cash &/or oil bonds to compensate for fuel subsidy. In fact, the finance ministry has clearly re-iterated today that there would be no oil bonds issuance this year.

    This was anticipated because government finances are stretched for FY10. In fact, a few days back, the finance secretary had said that the government would be willing to pay cash of only Rs12,000 crore-Rs15,000 crore, leaving a gap of Rs15,000 crore over and above the Rs17000 crore loss suffered by oil firms in upstream operations . After Murli Deora’s comment today, the OMCs should have sold off. But, of course, we are in a bull market.

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