Mutual funds (MFs) are betting on a turnaround in the healthcare sector to boost returns but are divided on the prospects of the information technology (IT) sector amid an uncertain growth outlook, a report by Business Standard stated.
As per the report, at the end of June, all of the top 20 fund houses were overweight on healthcare vis-à-vis the sector’s presence in the BSE 200 index. Meanwhile, in the case of the IT sector, only six of the 20 fund houses had overweight positions, it noted, further adding that the overall MF allocation in the technology sector has remained at a three-year low level of 9.3 percent.
Meanwhile, the report pointed out that the fund managers' bullish stance on healthcare is based on early signs of improvement in the US business environment and attractive valuations.
Both pharma and technology were among the worst performers in 2022. While the Nifty IT index ended the year 26 percent lower, the Nifty Pharma index declined over 11 percent. The returns have improved significantly this calendar year, thanks to the bull run in the market. So far this year, Nifty Pharma and Nifty IT have gained 11 percent and 8 percent, respectively.
Apart from pharma, fund houses are favouring the automobile and capital goods sector, informed BS. Except for Nippon India MF and Tata MF, all other major fund houses have overweight positions in automobile companies vis-à-vis BSE 200, the report mentioned. In the case of capital goods, every fund house in the top 20 has over 4.4 percent (the sector's weight in BSE 200) allocation, it noted.
However, private banks, NBFCs and consumer discretionary are the major sectors where most are underweight, added the report.
Fund managers are also running an underweight of 160 basis points on private banks, which have the largest weighting in the BSE 200 index at 19 percent, it stated.
