MUMBAI: Domestic long-only, or long-term, investors such as mutual funds and insurance companies used the Covid-triggered correction in the equity market to lap up stocks during the March quarter.
While they raised stakes in several Nifty500 constituents separately, three stocks that are part of the index saw brisk buying by both mutual funds and insurance companies, data available on AceEquity showed.
These domestic institutional investors raised stakes in
, and , suggesting that the three scrips emerged as consensus ‘buys’.
While mutual funds raised stakes in Tata Communications by 360 basis points, insurance companies upped theirs by 207 bps, betting on the company’s strong earnings performance amid the pandemic.
Shares of Tata Communications, one of the best performers of 2020, fell a little over 3 per cent during the January-March period because of an offer for sale that the government conducted at a 10 per cent discount.
Brokerage firm CLSA Asia-Pacific Markets in a recent note re-iterated its ‘buy’ rating on the stock, hoping that the company would benefit asymmetrically from the rapid drive for cloud adoption in the country and its ownership of the largest undersea data cable network in the world.
In the case of Bank of Baroda, mutual funds raised their holding by 273 bps and insurers by 177 bps on the hope of credit growth revival and asset quality improvement.
The buying was also reflected in the lender’s stock performance, as it rose 21 per cent during the March quarter despite a correction in the banking pack from mid-February as the second wave of Covid-19 surfaced.
The PSU banking pack had seen a scorching rally in the aftermath of the Union Budget, after the government said it would look to privatise most state-owned banks, barring State Bank of India, in the coming years. Further, investors were also counting on the economic recovery to aid credit growth for state-owned lenders like Bank of Baroda.
City Union Bank attracted robust interest from domestic investors during the quarter, as mutual funds and insurance companies raised their stakes in the lender by 136 bps and 562 bps, respectively. That quantum of buying, however, did not help the stock, as it fell 13 per cent for the three months.
Much of the stock’s underperformance can be attributed to selling from foreign portfolio investors, who reduced their stake by 65 bps during the quarter. Yet, brokerage firm Macquarie Capital Securities initiated coverage on the stock with an ‘outperform’ rating and projected a 50 per cent upside earlier this month.
Macquarie said the bank’s conservative approach and its high-yielding small businesses loan book makes it stand out as it can boost profitability going forward. “One of the biggest strengths for any bank is granularity of the balance sheet. City Union ranks better than even its larger private sector peers,” the brokerage pointed out.