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Top Indian stocks pick by mutual funds – the methodology

Published : August 4, 2017

Indian Stocks Pick by Mutual Funds in May 2016

Indian stock pick by studying mutual funds portfolio

Indian Stocks pick especially by small retail investors is a tedious work for them. Hence, mostly avoided by them and thus, rely on so-called market pundits for advice every time. However, with little knowledge of internet and working on excel, any retail investor can pick stocks which may generate a good return. Also, they can time for the proper exit with little or no loss, in case whenever market goes against them. This is among one of the articles on stocks picking and written mainly for small retail investors.

Indian stocks pick by mutual funds – the basis

Mutual funds buy and sell stocks of Indian companies on regular basis.

Generally, the funds run various schemes which are managed by funds managers. These funds managers are responsible for managing the portfolio of stocks and other assets depending up on the nature of schemes.

They are also responsible to deliver good returns to the small investors whose money they manage through the sale of units of these schemes. Now, not every scheme performs all the time.

Indian stocks pick by mutual funds – the methodology

For the present study different schemes of all the mutual funds was scanned on the basis of historical return. The idea is to select those schemes, which has generated the consistent return over a period of time.

If schemes perform good means that the selected stocks in their portfolio are capable of generating the good return over a period of time. Thus, the hypothesis is that if good schemes pick any stocks for the first time it will have ample potential to move up, as mutual funds do not churn stocks in short duration.

A little over 2300 schemes was found active in the month of May 2016. These were further filtered based on historical returns of over 15%. All the schemes were filtered simultaneously on 2 years, 5 years and since inception time frame. A total 46 schemes fulfilled these scanning criteria of return over 15% on all the three-time frame.

Those schemes were selected which was manages by funds managers who were having over 10 years of experience in managing funds. A total of 12 schemes was filtered out from 46 selected funds. After this, portfolio for the month May 2016 was detailed out for each scheme.

Lists of 794 scrip’s have been detailed out of these 12 schemes. Some of the scrip’s were repeated in nature due to pick up by more than one scheme.

Indian stocks pick by mutual funds – the outcome

Those scrip’s were considered further which these schemes picked up in May 2016 for the first time, i.e., in April 2016 holding in these scrip’s by the selected schemes were nil. Total 69 scrip’s were found, with repetition. In five scrip’s more than one scheme invested for the 1st time and in rest only one scheme.

Ujjivan Financial Services Ltd  (4 schemes), Crompton Greaves Consumer Electricals Ltd (2 schemes), United Breweries Limited (2 schemes), Gateway Distriparks Ltd(2 schemes) and Thyrocare Technologies Ltd (3 schemes) are the above-mentioned five scrip’s. When repetitions were adjusted 43

When repetitions were adjusted 43 scrip’s remains where mutual funds have for the 1st time picked the scrip’s.

Coming on the total investment in each company shares, Crompton Greaves and Ujjvan Finance has attracted over Rs.10000 lac each in the month of May 2016 and was the highest among the sample.

In the range of Rs.10000 lac and Rs.5000 lac, different schemes of these mutual funds picked seven company’s share. The companies are Tamilnadu Newsprint and Papers LtdUnited Breweries LimitedGateway Distriparks LtdThyrocare Technologies LtdCastrol India LimitedExide Industries Ltd and The Federal Bank Ltd.

Besides this investment in the range of Rs.5000 lac and Rs.1000 lac was done in 27 company’s shares. And below Rs.1000 lac investment was in seven companies. The detailed list is attached here in the excel.

Indian stocks pick by mutual funds – the conclusion

Now, what is the purpose of such analysis? This is what you must be thinking while reading this article. The answer is to get an alternative idea on stock selection method for mid to long-term horizon. 

The list of these 44 stocks gives you an idea about the performance of their companies. These companies are expected to perform better among their peers. And hence an ideal investment destination. The fund manager does their due diligence before picking any stock and putting substantial money in them.

One must also perform his/her own due diligence before putting their hard earned money in any stock. There are various alternative methods for stock selection and this is one of them.

Another stock selection method from the mutual fund, fund’s manager’s pick is those stocks where they are increasing their stake since last few months which is beyond the scope of this article and will be analyzed in another article on the same.


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