Home Business MFs Accumulate Stock to Shopping Basket Amid July Selloff; Should you Buy?

MFs Accumulate Stock to Shopping Basket Amid July Selloff; Should you Buy?

MFs Accumulate Stock to Shopping Basket Amid July Selloff; Should you Buy?


Zomato Share Price: During the July selloff, when bears gripped the market and toppled the online food delivery company, Zomato’s shares to its all-time low on exchanges, mutual fund buying and selling data for July shows, that most mutual fund houses who had Zomato in their portfolio earlier chose to accumulate the stock.

Zomato shares had fallen some 13 per cent in July as its one-year lock-in period ended. This was in addition to some 28 per cent drop the scrip witnessed in June, amid weak sentiment for new age stocks globally due to inflationary concerns.

Zomato emerged as the most bought stock in July by asset management companies (AMCs). Managers at Nippon Life Mutual Fund displayed the biggest conviction on the stock as they bought over 7 crore shares of the company during the month. Among others that bought shares of Zomato in bulk in July were Franklin Templeton (2.54 crore shares), Motilal Oswal AMC (1.3 crore), HDFC Mutual Fund (99 lakh) and UTI MF (38 lakh), data collated by East India Securities shows. In most cases, the buying happened across many funds and was not concentrated, showing the consensus view on the stock seems to have changed.

In value terms, MFs held Rs 1,343.41 crore worth of Zomato shares at the end of July against Rs 963.44 crore in June. Since July 27’s low, the scrip has risen a massive 61 per cent. This is till Wednesday’s intraday price of Rs 65.20.

After MFs lapped up Zomato shares amid the selloff, their decision to buy seems to be correct as the stock price has risen over 50 per cent since hitting a low of Rs 41 on July 26. However, it is still down over 60 per cent from its peak last year.

However, SBI Mutual Fund was a big seller dumping 1.43 crore shares.

Should you Invest?

Analysts believe what is the biggest asset for the company is its war chest of $1.6 billion as cash balance which they said was sufficient for the company to chart its growth path.

Kotak said last month that Zomato’s food delivery business was well-poised to grow at a strong pace over the next decade led by attractive market opportunity and strong execution capability. It has a BUY rating with target at Rs 79 per share.

In July, Credit Suisse maintained its ‘outperform’ rating on the stock, with a target of Rs 90. The brokerage said Zomato is on a clear road to profitability growth. It said that existing core customers would drive the food business.

Earlier, Jefferies said it remained bullish on the counter, as it felt that management has accelerated its journey towards better unit economics. It has a target price of Rs 100 on the stock.

The views and investment tips by experts in this News18.com report are their own and not those of the website or its management. Users are advised to check with certified experts before taking any investment decisions.

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