It's extremely interesting if you study the holding pattern of mutual funds. You find select stocks that almost always form a part of the portfolio.
HDFC Bank will always find a place right on top. Axis Equity Fund, ICICI Prudential Focused Bluechip Equity Fund, J P Morgan India Equity Fund, L&T India Large Cap Fund, Birla Sun Life Frontline Equity Fund and a host of other equity mutual funds have HDFC Bank as the number one holdings in their portfolio.
The reason why HDFC Bank is the most favoured is not difficult to see. It is amongst the finest private sector banks in the country. The non performing assets of the bank are well under control at a time when it's gone haywire for the banking sector as a whole. The bank consistently keeps growing at 20-30 per cent, which is rather phenomenal. This kind of growth rate has been for several quarters now.
It's difficult to see why HDFC Bank will not continue to occupy the top slot.
Infosys like HDFC Bank is a favourite of mutual funds. It form a portfolio of many mutual fund schemes including the likes of HDFC Equity Fund, BNP Paribas Equity Fund, Mirae Asset India Opportunities Fund, HDFC Equity fund, ICICI Prudential Dynamic Fund etc.
Having said that not all mutual fund schemes hold Infosys. Many have still trimmed their exposure to the stock, especially, in the last quarter we have seen Infosys reporting results that were a huge disappointment.
If expectations from Infosys in the next few quarters lag actual estimates one would see mutual funds trimming their exposure to the stock even further.
Larsen and Toubro
Engineering giant Larsen and Toubro is another favourite of mutual funds if you study the portfolio carefully. J P Morgan India, IDBI Top 100, UTI Opportunities Fund etc., all own L&T.
Solid management, a great track record, a virtual giant in its field and an Indian multinational make it a good pick. The stock has been a consistent performer over the last few years, which is why it is a preferred bet.
There are hopes that a turnaround in the economy would boost the performance of the stock. A small equity base also makes it a good buy for mutual funds.