Domestic MFs have bought US$18bn in Indian equities over the past two years. Based on the holdings analysis of the top 350 equity-focused MF schemes (US$60bn AUM), we estimate that financials & domestic cyclicals have received almost 85% of total fund inflows over the past 2 years. Funds have largely stayed away from exporters, defensives & commodity sectors.
Within banks, funds are rotating out of PSUs to private banks over the past year given concerns over PSU banks’ earnings. Within consumers, funds favor urban over rural consumption stocks. We expect rural allocations to improve given our expectation of a
pickup in rural demand. Funds are significantly OW mid/ small cap stocks with ~50% of portfolio allocated to them
