Mutual funds have increased their dependency on giant and large cap companies. In fact, many fund houses have gradually increased their allocation to giant and large companies. Such an allocation stood at a tad above 60% in July 2016 but have gradually risen since then to touch 70% recently, shows Value Research data.
To understand this data better, we spoke to some fund managers.
George Joseph, CEO and CIO ITI MF feels this could be because of the price movement in these segments. Since large cap stocks have performed better than small and mid-cap stocks recently, the allocation looks higher.
Sorabh Gupta, Associate Equity Fund Manager, Quantum MF said that Indian equity market has witnessed a tough period. In such a tough environment, it makes sense to focus on large companies as they have a higher probability of surviving, he believes.
Sorabh, however, denied the possibility that fund managers have moved to large caps in such a big way that it could rise as much as 10%. Like George, he also feels that price movement in these three segments have a big role to play.
Sorabh also added that the data should be looked with a pinch of salt, since a major reshuffle in mutual fund portfolios has taken place after SEBI changed the way large, mid and small cap stocks are defined.
S KrishnaKumar, CIO - Equity, Sundaram MF said that the rise in allocation to large cap stocks is a combined effect of a few factors. Apart from the above factors, he added a valuation angle to it.
In the last few months, foreign investors had pulled out heavily from Indian markets due to concerns over slowdown in Indian economy. As a result, some of the large cap stocks were available at attractive levels and offered better risk-return proposition amidst the market uncertainty, he added.
