In response to regulatory warnings that precipitated the market collapse in March, mutual funds gradually increased their holdings in midcap and smallcap equities by little amounts.
Mutual funds have increased their positions in 69 out of the 127 midcap companies in which they have invested, while decreasing their holdings in the other 58 equities. According to ACE equities statistics, mutual funds invested between Rs 100 crore and Rs 865 crore in 19 midcap stocks, while 29 stocks drew Rs 10-99 crore in March.
Mutual funds own shares in about 720 small-cap companies. In 192 enterprises, their interests decreased, and in 451, they expanded; in March, the MF positions in 77 stocks were unchanged. Investments in mutual funds varied from Rs 100 crore to Rs 665 crore for 20 small caps and from Rs 10 to Rs 99 crore for 125 companies.
A number of factors, including ED raids on a big market operator and affiliated entities, Sebi flagging "froth" in the market and asking mutual fund trustees to be cautious of flows into small and midcap segments, and the commissioning of a liquidity stress test that has spread fears of mutual funds unwinding to "look good" on this count, contributed to the BSE MidCap index's 0.1% decline and the BSE SmallCap index's 4.7% loss in March.
The Reserve Bank of India's potential move to control the amount of money entering the stock markets also caused market players to become apprehensive.
Samvardhana Motherson International topped the midcap market with MF purchases of Rs 856,563, followed by Canara Bank with Rs 604 and Steel Authority of India with over Rs 853 crore. Following a large block sale in March that increased MF holdings to 90.33 crore shares from 83.01 crore shares the month before, Samvardhana Motherson International experienced a notable gain of 7.32 crore shares. MFs increased their shareholdings in SAIL by 6.35 crore, while Canara Bank saw MF purchases of 1.04 crore shares.
In the midcap market, mutual funds sold Shriram Finance the most, at Rs 514 crore, followed by Lupin and PB Fintech, at Rs 515 crore and Rs 469 crore, respectively. Mutual funds sold Jindal Steel and Power, Cummins India, and Tata Communications for between Rs 300 and Rs 400 crore.
MFs showed the greatest interest in purchasing NLC India in the smallcap market following the government's offer-for-sale to decrease its shareholding. They spent about Rs 665 crore, or 2.92 crore, on shares. MFs increased their holdings by Rs 405 crore, Rs 282 crore, and Rs 262 crore in other companies including Prestige Estate Projects, Suven Pharmaceuticals, and GR Infraprojects, respectively.
The largest smallcap stock was Bata India, which witnessed MF sales of almost Rs 276 crore. Bharat Dynamics and Hindustan Copper came in second and third, respectively, at Rs 193 crore and Rs 178 crore.
