Blue-chip stocks are back, as several brokerages predict these large companies to outperform the smaller ones in the second half of the current financial year. Mutual funds seem to agree with these analysts by investing in these dependable and established stocks in October, Prime database data shows.
According to the Prime Database data for October, mutual funds invested over Rs 13,000 crore in top 15 blue-chip stocks. These are ICICI Bank Ltd, HDFC Bank Ltd, Reliance Industries Ltd, Kotak Mahindra Bank, Tech Mahindra Ltd, Hindalco Industries Ltd, Bajaj Auto Ltd, NTPC Ltd, Larsen & Toubro Ltd, PowerGrid Corp, Tata Consultancy Services Ltd, Titan Co Ltd, Dabur India Ltd, Hero MotoCorp Ltd and Asian Paints Ltd.
In a recent note, Kotak Institutional Equities said it preferred mega-cap stocks due to their fair valuations and ability to withstand uncertainties. It expects global and Indian markets to be impacted by factors like interest rates in developed countries in early 2024.
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While India may see a consumption rebound, sectors like automobiles and can face disruptions. Moreover, India is heading into national elections early in 2024, it said.
Multiple brokerages have expressed optimism about India in their recent reports, being bullish on the country's prospects. Recently, Morgan Stanley predicted a BSE Sensex target of 74,000 by December 2024, indicating a 14 percent upside. This projection implies the Sensex will trade at a trailing P/E multiple of 24.7x, surpassing the 25-year average of 20x.
The higher valuation indicates increased confidence in India's medium-term growth cycle, the brokerage said.
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Goldman Sachs upgraded has India to an "overweight" category, aligning with other major brokerages. Its analysts foresee robust economic growth in India, propelled by domestic demand, continuous inflow of funds from mutual funds, and an anticipated shift of supply chains from China.
Between April and September 2023, the market saw huge interest from foreign investors amid improvements in macro-economic factors. Both Sensex and Nifty rose around 12 percent, while BSE midCap and smallCap surged approximately 35 percent and 39 percent, respectively.
October saw huge volatility amid geopolitical tensions and expectations of higher interest rates for longer and the Sensex and the Nifty lost around 3 percent each.
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In October, mutual funds divested nearly Rs 2,700 crore from public sector firms, including State Bank of India, ONGC Ltd and SAIL.
They made fresh investments of around Rs 700 crore in newly listed companies like Honsa Consumer Ltd, Cello World Ltd and Blue Jet Healthcare Ltd. Mutual funds also initiated new positions in stocks such as IRM Energy Ltd, GOCL Corp Ltd and Sasken Technologies Ltd.
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