New-age tech stocks remain in MFs’ shopping list in Q2, even as FIIs turned their back

Improving earnings trajectory and a significant correction in valuation are likely to have prompted mutual funds to turn their eyes on the new-age consumer technology pack, even as foreign investors were on an exit mode.

Mutual funds raised their holding in most of the new-age technology stocks in the quarter ended September, while foreign investors reduced their ownership in a majority of them, data analysed by ETMarkets showed.

Mutual funds increased their stake in Delhivery, FSN E-Commerce Ventures, One97 Communications, PB Fintech, and Zomato in the last quarter, while FIIs reduced stake in Delhivery, FSN E-Commerce, Paytm parent, and PB Fintech.

The buying by mutual funds was the highest in Zomato and Nykaa parent during the quarter. Zomato was the only stock in the pack to witness buying by both mutual funds and FIIs.

Interestingly, all new-age technology stocks, barring PB Fintech, have given high double-digit returns so far in FY24. Infact, Zomato has turned a multibagger and is the best performing

stock in the space.



In Zomato, mutual funds increased their holding by a whopping 226 basis points sequentially to 10.56% in the September quarter. MFs have increased their stake in the online food delivery aggregator for the sixth consecutive quarter. They held a meagre 2.4% stake in the company in June 2022. FIIs meanwhile increased their stake by 29 bps to 54.72%.

The second stock that saw active buying by MFs was FSN E-Commerce, even though this stock has been a tailender in the pack.

Mutual funds increased their stake by 212 basis points sequentially to 10.62% in the September quarter.

This is also the stock that saw an increase in MF holding for the sixth straight quarter. On the contrary, FIIs reduced their stake for the second straight quarter. Their holding was down by 20 bps to 9.84% in the September quarter.

In Paytm, mutual funds hiked their stake by 27 bps to 2.79%, and the number of MF schemes owning the stock also increased to 19 from 15, according to Trendlyne.

Meanwhile, FIIs significantly reduced their exposure to the payment gateway services provider in the quarter, as their cumulative holding was down to 60.92% as of September end, from 72.11% a quarter ago.

One97 Communications was the only stock to see maximum selling by FIIs in the new-age tech pack.

In PB Fintech, mutual funds raised their stake by 38 bps to 7.83% in the September quarter, whereas FIIs reduced their holding by 20 bps to 43.97%, and this is the second straight quarter of selling by them. Compared to peers in the pack, PB Fintech has given single-digit returns so far in the current financial year.

What should investors do?
Even Though footfalls in malls and retail outlets have significantly increased post pandemic, the trend of online is still growing at a faster pace than offline.

This is particularly evident from the trends in ‘consumer foodservice’ and ‘fashion and lifestyle’ categories, which has benefitted players like Zomato and Nykaa.

This has triggered a bullish view for Zomato, and most analysts see scope for a further appreciation in the stock. While the overhang of FII selling persists, market experts believe that intermittent corrections will give an opportunity to accumulate the stock.

Even after 107% returns in FY24 so far, the average target price of Rs 125 for Zomato stock, implies an upside potential of more than 16% from the current levels.

Infact, ICICI Securities has a “buy” rating on the stock with target price of Rs 160, and Zomato is the top pick in the internet space.

Paytm is another stock that has attracted investor interest, with the stock giving more than 44% returns so far in FY24. The average price target for the stock at Rs 1,069, implies an upside of more than 16% from the current levels.

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(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of Economic Times)