Domestic Mutual Funds Add NBFC, AMC, And Pharma Stocks As Oil Price Risks Rise

Domestic mutual funds leaned towards defensive sectors in April, increasing exposure to pharmaceutical companies while selectively adding non-banking financial companies (NBFCs) and asset management companies (AMCs) as geopolitical tensions in West Asia pushed crude oil prices higher and kept markets cautious.

Shares of several pharma companies saw renewed investor interest during the month. Stocks such as Sun Pharmaceuticals, Aurobindo Pharma, Dr Reddy’s Laboratories, Emcure Pharmaceuticals, Divi’s Laboratories and Mankind Pharma featured prominently in mutual fund buying activity, according to the latest monthly portfolio disclosures compiled by ETIG Database.

The broader positioning reflected fund managers’ preference for sectors with relatively stable earnings visibility during uncertain global conditions.

Why Are Fund Managers Turning To Pharma?

A key trigger behind the buying spree has been the expected patent expiry of semaglutide in India in 2026. Semaglutide is the active ingredient used in blockbuster diabetes and weight-loss drugs such as Ozempic and Wegovy.

Domestic fund managers are betting that Indian drugmakers could benefit from a large generics opportunity once the patent expires. The market expects several Indian pharmaceutical companies to launch lower-cost versions over the next few years, opening up a potentially sizeable revenue stream.

Export prospects aside, the increasing prevalence of obesity and diabetes in India would also fuel future demand for these drugs. This has increased investor confidence in companies with solid manufacturing and distribution operations within the country.

The shift into the pharmaceutical industry occurs amid investor interest in defensive sectors. Higher crude oil prices and geopolitical uncertainty usually drive investors into industries that are not affected by economic cycles.

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Selective Buying Seen In Financial Stocks

While pharma remained the biggest defensive play, mutual funds also increased exposure to a few financial names linked to retail lending and asset management.

Poonawalla Fincorp and PNB Housing Finance saw incremental buying as fund houses continued to favour segments tied to affordable housing and retail credit growth. Analysts believe the steady expansion of India’s middle-class borrowing market continues to support long-term growth prospects for lenders focused on retail customers.

Asset management companies also attracted fresh allocations. Nippon Life India Asset Management and Aditya Birla Sun Life AMC were among the names that saw buying interest from domestic funds.

Fund managers appear to be viewing the AMC business as a relatively stable long-term play amid consistent SIP inflows and rising retail participation in equities.

Valuations in the segment are also considered reasonable compared with some other financial stocks. Moreover, some funds have also cut down their exposure to cyclical and commodities-related businesses, showing a preference for stability over risk-taking.

Source:

The Economic Times