In April MF Invested In IT, Pharma And Telecom

ETIG With the lack of recovery in profits of companies, fund managers have lacked stock ideas.

In the absence of earnings growth triggers, which has shrunk the universe of investible ideas, leading fund houses have resorted to selling more of a part of their portfolios than buying fresh stocks in April this year. Managers have been sellers in select public sector companies. Most prominent among them are SBINSE -0.17 %, Coal IndiaNSE 1.70 %, ONGCNSE -0.90 %, and Power Grid CorporationNSE -0.33 %. There have been very few companies which were fresh entries in the April portfolio of leading  fund houses.
Apart from participating in initial public offerings (IPOs), mutual funds have enhanced exposure in select IT companies. Also a sift through the buy-sell pattern of fund houses shows that in April in comparison with March, managers have enhanced exposure in companies which are essentially bottomup and low-beta ideas in sectors such as pharmaceutical and telecommunications. Here is the low-down on a few prominent companies in which fund managers enhanced their exposure.

Cipla NSE -0.98 %
Turnaround in business(noticeable improvement in the US sales), encouraging sales guidance, and new approvals of Abbreviated New Drug Application (ANDA) have improved the earnings’ growth estimates of pharmaceuticals company Cipla. The company’s sales from the US markets have shown high momentum which is expected to fund its research and development investments. This should boost the company’s overall profitability. Besides this, the company has been clocking steady growth in its domestic business. According to analysts’ estimates, the company’s earnings are expected to grow at compounded annual growth rate of 23 per cent in the three fiscals ending FY21.

One of the key reasons why fund managers enhanced exposure to NTPC because of its stable and highly predictable earnings’ growth. The company has added nearly 5 Gigawatt of incremental capacity on the consolidated basis in the previous fiscal year. This may add to 10 per cent increase in the regulated equity, thus translate into improvement in the earnings. In addition to this, the company’s coal stock data at its plants has improved considerably with coal stock at 18 days in March this year compared with seven days about six months ago. The improved coal supply, plant availability factor and annual incremental addition of 4-5GW of capacity could support company’s return of equity in the medium term.

Increasing number OF large deals (over $100 million) across geographies and business verticals, improved financial performance in key business verticals (BFSI, retail) amid high competition, superior execution, pricing power and strong demand for digital segment point out that TCS would gain further market share in the coming quarters. Besides this, TCS has been able to maintain its margins. Its margins are highest in the industry. In contrast to this, margins of its peers are falling. Also favourable currency movement works in the company’s favour. These factors have attracted high interest in the company’s stock.

Alkem Laboratories
One of the key triggers in the stock of Alkem Laboratories is price correction. Since January till the end of March, the stock of Alkem Laboratories fell close to 10 per cent while the benchmark index Sensex gained close to 7 per cent. This fall was largely due to weaker than expected FY19 financial performance of the company. The pharmaceuticals company which is into manufacturing and selling of generics drugs active pharmaceutical ingredient (APIs) and neutraceuticals both in India and overseas markets, is expected to benefit from certain earningsenhancing triggers. These are pronounced improvement in its financial performance in the past few quarters, favourable currency impact, 60 pending Abbreviated New Drug Application (ANDA) in generics segment in the US markets (27 per cent of total sales), which shows promise of high scalability and consistent growth in the US markets. Due to these factors, analysts foresee that the company’s earnings to grow at a compounded annual growth rate of 23 per cent in the three years ending FY21.


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