Mutual funds (MFs) — flush with cash amid record inflows in July — invested heavily in the Rs 25,000-crore qualified institutional placement (QIP) of India’s largest lender State Bank of India (SBI).
Illustration: Dominic Xavier/Rediff
Fund managers acquired SBI shares worth Rs 10,200 crore last month, making the lender their biggest buy in July.
According to Nuvama Alternative & Quantitative Research (NAQR) estimates, SBI MF and HDFC MF deployed the highest amounts at Rs 2,322 and Rs 1,500 crore, respectively.
Quant MF and Nippon India MF bought close to Rs 1,200 crore worth of shares each.
The largest ever QIP in India had drawn bids worth nearly four times the shares on offer.
Apart from domestic MFs, Life Insurance Corporation and about half a dozen foreign portfolio investors (FPIs) had participated in the QIP.
Information technology (IT) giants Infosys and TCS, which were at the centre of last month’s volatility, also witnessed heightened buying interest.
Fund managers added Rs 9,400 crore worth of Infosys and TCS stocks into MF portfolios last month.
HCL Technologies was also among the top 10 most-bought stocks.
The Nifty IT index suffered a 9 per cent decline in July, the highest among all sectoral indices.
The index is down nearly 20 per cent in 2025 as lacklustre earnings, US tariff concerns, and staff layoffs among weak demand outlook, have dampened investor sentiment.
Apart from IT, lenders SBI, newly-listed HDB Financial, Axis Bank, Kotak Mahindra Bank and ICICI Bank garnered MF investments of over Rs 2,000 crore.
Despite the large investments, cash holdings in the equity MF schemes inched up last month.
“After a brief phase of strong equity deployment by pure equity schemes — which had steadily reduced cash holdings — July saw a marginal uptick in the cash component.
“This was not due to limited deployment, but rather record inflows into mutual funds, prompting them to maintain slightly higher cash buffers.
“Cash and equivalents rose from Rs 1.82 trillion in June to Rs 1.85 trillion in July, lifting the proportion from 5.34 per cent to 5.46 per cent,” the NAQR report said.
Net inflows into equity schemes had scaled a record high in July after a six-month period of subdued investor interest.
Active equity schemes raked in a net Rs 42,702 crore last month, going past the previous high of Rs 41,156 crore in December 2024.
Liquidity available with MFs also went up as a result of their move to trim allocation towards select stocks.
Interglobe Aviation and Eternal witnessed net MF selling of Rs 2,400 crore and Rs 1,700 crore, respectively.
HPCL, Hindalco Industries, HDFC AMC, ACC and HDFC Bank were also among the most-sold stocks.
