Equity MFs gamble on oil and gas scrips

Coimbatore: Equity mutual funds (MFs) are betting big on shares of oil and gas companies. The weightage of the oil and gas sector in MF portfolios increased for the fourth successive month to reach a new high of 7.8% in February, improving 0.2% on a month-on-month (m-o-m) basis and 1.2% on a year-on-year (y-o-y) basis.
The sector now ranks fifth in the sector allocation of mutual funds — it was at the seventh position 12 months ago. Of the top-10 stocks in terms of value increase m-o-m, five were from oil and gas and private sector banks.

The value of MF holdings in Reliance Industries, the heavyweight in the oil and gas pack, went up by Rs 1920 crore in February, despite the stock remaining flat (0.4% advance on a m-o-m basis). Notably, the stock saw net buying by 17 of the top-20 funds.

GAIL saw the maximum increase in MF holdings in the oil and gas pack during the month. The ownership of GAIL in MF portfolios rose 6.4% in volume terms and 9.6% in value terms. This was followed by Reliance Industries, which saw a 5.8% increase in volume terms and 6.1% in value terms.

ONGC and state-run oil refining majors HPCL (Hindustan Petroleum Corporation) and BPCL (Bharat Petroleum Corporation) too saw a growth both in volume and value terms during February. Despite the recent increase, the oil and gas sector remained an underweight in MF portfolios. Oil and gas scrips had a 11.5% weightage on the Nifty index and 10.4% weightage on the BSE-200 index in February.

“Valuations have turned attractive as share prices of oil and gas companies have corrected. Since oil prices are also remaining range bound, there is no incremental negative for the sector now,” said Gopal Agrawal, senior vice president, investments, DSP MF. “These (oil and gas) stocks are available at much lower valuations compared to other sectors,” said Swati Kulkarni, executive vice president, UTI MF.

Fund houses showed interest in oil and gas, private banks, consumer-oriented firms, cement, capital goods and utilities in February, with these sectors witnessing m-o-m increase in weightage in MF portfolios. Public sector banks, healthcare, NBFCs (non-banking finance companies), metals and chemicals saw a m-o-m decrease in weightage. Private banks (18.6%) remained the favourite pick of fund houses in February and was followed by information technology (9.5%), NBFCs (8.4%) and consumer-oriented companies (8.1%).

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