Markets can surprise even the most experienced investor. The sharp rise in the equity market in October 2019 has not just stumped you or me; even the wily fund managers may have misread it. RupeeIQ looked at the most sold stocks in September 2019 (in terms of the number of net shares sold) and then studied the October returns of those out-of-favor stocks. Turns out that fund-houses got 13 of the top 20 most sold stocks wrong. While collectively fund-houses got Tata Power and Vodafone India stock sells right, they missed the jump in SBI, Motherson Sumi, Yes Bank, SAIL, NMDC, NCC and Arvind Ltd. PSU stocks proved to be tricky for fund managers, as a large number of them sold in September did well in October. To know more, read on.
Why fund managers sell a stock
Fund managers regularly sell stocks. Typically, fund managers sell a stock when they see the business faltering on any of their filters/parameters. They sell a stock when the current valuations have captured the long-term growth potential. Fund managers also typically sell a stock when it no longer fits their investment framework.
Fund managers buy and sell stocks based on their investment universe. If the fund company’s analysts decide to remove a company from the stock universe, fund managers are forced to sell it across their funds. Also, some fund managers sell stocks when they see better opportunities elsewhere.
RupeeIQ looked at the top 20 most sold stocks in September 2019. By most sold, we mean these stocks have recorded the highest net quantity sold in that month. These stocks have seen fund-houses collecting net selling between 45 lakh to 6.16 crore shares in September 2019. This list comprises nine large cap stocks, six mid cap stocks and five small cap stocks.
Top large cap stocks sold in terms of net quantity – Vodafone Idea, SBI, Motherson Sumi, Vedanta, ONGC, NTPC, NMDC, Marico and IOC
Top mid cap stocks sold in terms of net quantity – Tata Power Company, Yes Bank, SAIL, L&T Finance Holdings, NALCO and Edelweiss Financial Services
Top small cap stocks sold in terms of net quantity – NBCC, Indian Energy Exchange, Engineers India, NCC, and Arvind
RupeeIQ looked at how these stocks have performed in October 2019. Our analysis showed that fund-houses collectively were right in 7 of the 20 stocks because these stocks fell in October 2019.
Vodafone Idea fell 38.2%. Tata Power Company, Marico and NALCO fell in 5-6% range. Vedanta and Edelweiss Financial Services fell in 2-3% range. Indian Oil Corporation (IOC) was mostly flat.
On the other hand, fund-houses missed gains in 13 out of top 20 most sold stocks. These 13 stocks were sold in huge quantities in September 2019, but the scrips staged quite a comeback in October 2019.
The massive 23% gain on October 31 in Yes Bank has helped the private sector bank stock clock over 37% total rise this month.
PSU stocks turned out to be quite tricky for fund-houses. While fund managers net sold large quantities of NMDC, SAIL, NBCC, SBI, ONGC, and NTPC, most of these stocks delivered great returns in October 2019. NMDC shares jumped nearly 25% this month. SAIL shares zoomed nearly 12%. NBCC gained 8.3%.
Mutual funds sold tens of lakhs of shares of Indian Energy Exchange (IEX) and Motherson Sumi last month. In October, IEX sprang 18% and Motherson Sumi Systems gained over 16%.
Here is a table on how the top 20 most sold of September stocks performed in October.
|Stock Name||Sector||Classification||Net Quantity Sold in Sept-2019||Oct-2019 % stock price change|
|Tata Power Company Ltd.||Energy||Mid-Cap||61692401||-6.2|
|Vodafone Idea Ltd.||Media and Communications||Large-Cap||30936641||-38.2|
|State Bank Of India||Financials||Large-Cap||23312466||7.05|
|Motherson Sumi Systems Ltd.||Automobile and Ancillaries||Large-Cap||15690145||16.4|
|Oil & Natural Gas Corporation Ltd.||Energy||Large-Cap||12613955||6.6|
|Yes Bank Ltd.||Financials||Mid-Cap||10148961||37.2|
|Steel Authority Of India Ltd.||Metals||Mid-Cap||8872042||11.66|
|NBCC (India) Ltd.||Construction||Small-Cap||8761361||8.3|
|L&T Finance Holdings Ltd.||Financials||Mid-Cap||7472594||10.6|
|Indian Energy Exchange Ltd.||Energy||Small-Cap||7115813||18|
|Engineers India Ltd.||Capital Goods||Small-Cap||5983865||0.21|
|National Aluminium Company Ltd.||Metals||Mid-Cap||5743070||-5.49|
|Edelweiss Financial Services Ltd.||Financials||Mid-Cap||5013669||-2.37|
|Indian Oil Corporation Ltd.||Energy||Large-Cap||4525429||-0.17|