NEW DELHI: For much of the September quarter, midcap stock GMM Pfaudler was not in the good books of many small shareholders, as the company’s promoters put about 28 per cent of their holding on the block through an offer for sale that was priced at a 33 per cent discount, causing wealth erosion for existing investors.
Earlier, the company’s decision to buy a majority 54 per cent stake in Pfaudler’s global business also didn’t go down well with many investors.
Yet, the stock emerged among the most favourite picks of domestic mutual funds, which increased exposure by over 100 basis points to GMM Pfaudler and 17 other stocks, including Zydus Wellness NSE 2.79 %, Mindtree and Bandhan Bank, during the July-September period.
Initial shareholding data of India Inc available so far suggests the top MF pick during the quarter was Zydus Wellness, where fund managers raised stake by 515 basis points to 9.05 per cent at the end of September from 3.9 per cent at the end of June.
GMM Pfaudler, whose shares rallied earlier this year before hitting the road bump, saw MFs hike stake by 407 basis points to 6.02 per cent from 1.95 per cent sequentially.
The rally on the counter fizzled out during the September quarter, and the stock is down 11 per cent since June 30, thanks to the recent offer for sale (OFS).
In the case of Mindtree, domestic mutual funds raised their stakes to 8.66 per cent from 4.71 per cent QoQ, up 395 basis points; while in Bandhan Bank, their holding went up by 322 basis points to 4.92 per cent from 1.7 per cent.
At least 12 of the 17 stocks have delivered 10-115 per cent return since June 30. Zydus has rallied 41 per cent since June 30. HDFC Securities said while the company’s June quarter performance was impacted by Covid-related disruptions, a sharp improvement seen towards the end of the quarter for some of the brands was encouraging.
“Moreover, Zydus’ recent launches were targeted towards capitalising on the health and hygiene trend, which is likely to support revenue performance in the near term,” the brokerage said.
Midcap IT firm Mindtree shares have rallied 44 per cent since June 30. That’s even when promoter holding in the stock came down to 67.59 per cent from 73.49 per cent during September quarter. The company reported a 130 per cent surge in profit at Rs 213 crore for June quarter, which helped sustain the bullish outlook on the counter.
Bandhan Bank shares have risen a mere 2 per cent since June 30, but fund managers still remained gung ho on the stock.
“Bandhan Bank is a unique Indian financial services play that focuses on underpenetrated products primarily in the underpenetrated geographies. This coupled with a superior retail deposit franchise would result in sustainably high growth,” brokerage CLSA said in a note.
Among others from the pack of 17, Max Financial Services NSE 1.47 % (up 1.86 per cent), Century Plyboards (up 1.75 per cent) and Firstsource Solutions (1.52 per cent) saw MF holdings go up by 1.5-1.8 per cent.
Max Financial stock has been upbeat amid talk that Axis Bank was looking to acquire a 17 per cent stake in the NBFC to form a joint venture. Earlier the lender had expressed its intention to buy 29 per cent, which was then lowered amid regulatory uncertainty over the deal.
For Century Ply, July sales stood at 75 per cent and the company hoped to achieve 100 per cent of last year’s sales by March quarter.
Firstsource was another stock that drew a lot of mutual fund interest. Analysts say the growth in the company’s financial services verdict, which accounts for over 50 per cent of its revenues, is likely to accelerate due to its strong positioning in the US mortgage market and the underlying buoyancy that could sustain over the foreseeable future.
Max Financial is up 11 per cent since June 30, Century Ply 45 per cent and Firstsource 97 per cent.
Other stocks that mutual funds lapped up during the quarter included Alembic Pharmaceuticals (MF stake up 1.3 per cent QoQ), Gujarat State Petronet (1.29 per cent), Persistent Systems (1.25 per cent), Radico Khaitan NSE 0.77 % (1.22 per cent) and Indiamart Intermesh (1.18 per cent).