What Are Flexi Cap Mutual Funds Buying in, and Why?

Three flexi cap funds reportedly increased their HDFC Bank holdings in September. Another reduced its position. Elsewhere, managers added to automobile companies, expanded selected healthcare investments and made fresh entries into property stocks.

The interesting story is the difference between their decisions. Even when managers buy the same company, the size of the purchase and its importance to the fund can be very different. Understanding those differences tells investors more than a list of the stocks mutual funds already own.

This review examines ten established flexi cap mutual funds: Parag Parikh, HDFC, Kotak, SBI, ICICI Prudential, Aditya Birla Sun Life, Nippon India, JM, DSP and Franklin India. The comparison uses September portfolios against August, with earlier disclosures where accessible.

Which Stocks Are Flexi Cap Mutual Funds Buying?

The reported additions show overlap in banks and automobile companies, alongside more selective purchases in pharmaceuticals, telecom and property. The table separates additions to an existing investment from a new portfolio entry.

There are two useful distinctions here. First, buying more of an existing holding is different from introducing a new business. The official update for HDFC Flexi Cap Fund, for example, lists Mphasis and Molbio Diagnostics as new entries, while Bank of Baroda left the portfolio.

Second, the biggest percentage increase can begin from a small base. A fund doubling a tiny investment may change its overall risk less than another fund making a modest addition to a company that already dominates its portfolio.

The history also matters. PPFAS’s August update identifies DLF as a new investment, and its September update identifies a further addition. That supports a position being built across two successive disclosures; it does not establish a longer buying streak.

Do Multiple Fund Managers Agree on the Same Stocks?

The clearest reported overlaps include Kotak Mahindra Bank, HDFC Bank, Bharti Airtel, TVS Motor and M&M. These are purchases by separate schemes, rather than a count of how many schemes happen to own each stock.

However, agreement is incomplete. Franklin India reportedly reduced HDFC Bank by 35.25 lakh shares while HDFC, SBI and Aditya Birla Sun Life added. Franklin also reduced Kotak Mahindra Bank while several other schemes increased their holdings.

That disagreement is useful. A manager evaluates a company alongside everything else the fund owns, the price paid, available alternatives and the size of the existing position. Selling some shares can reflect portfolio management without implying that the company’s business has deteriorated.

The scale of the addition also changes the interpretation. The reported Kotak Bank holding of ICICI Prudential Flexi Cap Fund rose from 55.50 lakh to 95.50 lakh shares, an increase of about 72%. HDFC’s reported addition to the same stock was much smaller relative to its existing holding. Counting both as one manager buying conceals that difference.

What Could Explain Interest in These Companies?

Portfolio disclosures show the outcome of investment decisions, but usually do not explain each trade. The business developments below provide possible investment considerations, not confirmed explanations of a manager’s reasoning.

Timing matters too. Several September-quarter results were published in October, after the portfolio changes examined here. They help investors assess the businesses now; they cannot be presented as information that caused September purchases.

HDFC Bank: Can Lending Growth Translate Into Better Earnings?

Banks earn much of their income from the difference between interest received on loans and investments and interest paid on deposits and other funding. Lending more helps only if the bank can fund that growth at a reasonable cost and borrowers repay it.

HDFC Bank’s October release showed standalone net interest income growing 9.7% to approximately ₹34,620 crore in the September quarter. Standalone net profit grew more slowly, by 4.7% to approximately ₹19,510 crore. This illustrates why rising interest income should be assessed alongside provisions, expenses and other income.

For someone researching the reported additions, the useful questions concern deposit growth, the cost of attracting deposits and the profitability of new lending. A larger loan book alone does not answer them. Valuation also needs to be judged against the return the bank earns on shareholders’ capital, rather than assuming that institutional buying makes the stock inexpensive.

ICICI Bank: Can Strong Growth Continue Without Weaker Loan Quality?

ICICI Bank’s September-quarter standalone profit rose 20.1% to ₹14,843 crore. Its net non-performing asset ratio was 0.30%; this measures recognised problem loans remaining after provisions, relative to net advances.

However, its net interest margin fell to 4.18% from 4.30% a year earlier. This margin measures the interest spread earned relative to interest-earning assets. Stronger business growth can coexist with a narrower margin, so investors need to examine both rather than relying on the profit headline.

For the investment case to remain convincing, growth must produce adequate returns after funding costs and future loan losses. A low problem-loan ratio today is useful evidence, but it cannot guarantee that loans made during an expansion will remain healthy. Comparing the bank’s valuation with sustainable profitability is more informative than counting fund buyers.

TVS Motor: Are Higher Vehicle Sales Producing More Profit?

TVS Motor reported September-quarter revenue of ₹17,103 crore, up 44% from a year earlier. Profit after tax rose 52% to ₹1,377 crore in the company’s operating results release. Profit growing faster than revenue gives investors a reason to examine product mix and manufacturing profitability.

The business questions extend beyond how many vehicles leave the factory. Investors should examine customer demand, dealer inventory, export markets and the cost of competing in electric vehicles. Sales supported by heavy discounts can have a different effect on earnings from sales supported by stronger demand and a more profitable product mix.

Valuation remains a separate question. Even a growing manufacturer can deliver disappointing share returns if its price already assumes unusually strong earnings for several years. The reported purchases establish interest from selected managers, not a conclusion about the price a retail investor should pay today.

M&M: How Much Growth Comes From the Core Businesses?

Mahindra & Mahindra offers exposure to SUVs, tractors and other group businesses. Its June-quarter consolidated revenue rose 28% to ₹58,188 crore, while profit after non-controlling interests rose 34% to ₹5,455 crore. These results were published in July and were therefore available before September.

Its SUV and tractor businesses give investors different sources of demand, but both need monitoring. Vehicle competition can affect pricing, while rural incomes and agricultural conditions can influence tractor purchases. Group earnings also require attention because subsidiaries can change the consolidated result.

As of the 3 November research date, M&M’s September-quarter results were scheduled for 5 November. The next useful check is whether its core businesses continue converting demand into profit and cash. It would be premature to insert an unannounced September-quarter earnings figure into the explanation of fund buying.

DLF: Are Property Sales Turning Into Cash?

The investment case for DLF needs a different set of questions. A home booking, a customer payment and revenue recognised in the accounts can occur at different times. Looking only at quarterly accounting profit can therefore miss changes in the underlying property business.

DLF’s October release reported September-quarter consolidated revenue of ₹2,298 crore, net profit of ₹1,301 crore and operating cash flow of ₹1,858 crore. Net profit grew 11% from a year earlier. Those figures provide current business context for PPFAS’s disclosed position-building, rather than evidence of its exact purchase rationale.

The useful watchpoints are collections, launches, delivery schedules and the cash needed to complete projects. Investors should also distinguish the development business from recurring rental operations. A large addition by one manager does not remove property-cycle risk or establish that the shares trade below a reasonable valuation.

Sun Pharma: Which Profit Number Reflects the Business?

Sun Pharma’s September-quarter release reported sales of ₹16,100 crore, up 11.8%. Reported net profit was ₹1,988.5 crore, compared with adjusted net profit of ₹3,162 crore. Adjusted profit removes specified items, so investors need to understand those adjustments before comparing earnings across periods.

The regional picture was mixed. India formulation sales grew 17.3% in rupees, while US formulation sales declined 8.2% in US dollars. This makes a simple explanation such as “fund managers are buying because the whole business is growing strongly” incomplete.

For investors assessing the reported additions by Kotak and Nippon India, the questions concern the durability of domestic growth, progress in innovative medicines and pressures in the US business. A valuation based on adjusted earnings also needs scrutiny: costs excluded from one quarter’s profit can still require cash or recur later. The fund purchases do not settle that judgement.

Are Flexi Cap Funds Moving Towards Large, Mid or Small Cap Stocks?

The verified allocation evidence does not support a single answer for the whole category. Kotak’s official factsheets show a smaller large-cap share and a larger mid-cap share in September than in August. HDFC’s official update shows its large-cap share unchanged, with a smaller mid-cap share and a larger small-cap share.

The longer view adds context. HDFC’s reported large-cap allocation was 74.5% in June, compared with 70.3% in September. That is a different observation from saying it reduced large-cap allocation during September, when the reported percentage was unchanged.

These are allocation changes, not a direct measure of how much money moved between company sizes. Different share-price movements can change the percentages even when quantities remain unchanged. Identifying active reallocation across the sample would require matching every holding to the applicable AMFI classification and separating trades from market movements.

There is also a difference between reducing smaller-company exposure and keeping money available for future investment. Parag Parikh Flexi Cap Fund disclosed a combined reserve of cash, debt and money market instruments, and arbitrage positions of 9.77% in September, down from 11.58% in August. Calling the entire amount cash would be inaccurate.

Its official asset-class disclosure also shows overseas securities at 11.90% and REIT/InvIT units at 6.27% in September. Those assets should not be placed in a residual column and described entirely as uninvested money. Overseas shares bring business and currency exposure; property and infrastructure trusts have their own income, interest-rate and market risks.

Which Stocks Are Flexi Cap Funds Reducing or Exiting?

The reported sales strengthen the case against treating flexi cap managers as one group. Some schemes reduced businesses that others were adding to, while others exited individual stocks altogether.

There are also exits confirmed directly in AMC updates. HDFC identified Bank of Baroda as an exit, while PPFAS identified Great Eastern Shipping as an exit. Neither disclosure, by itself, establishes the manager’s reason for selling.

Sector labels can conceal these choices. Kotak’s reported TCS exit sits alongside HDFC’s disclosed entry into Mphasis. It would be misleading to turn those two decisions into a claim that all flexi cap managers are abandoning, or embracing, IT services.

Our Take: What Should Flexi Cap Investors Watch Next?

The next portfolio disclosure is most useful as a check on an existing investment decision. Start with the role of each scheme in your own portfolio: whether it provides a distinct mix of businesses and risks, and whether that mix still matches what you expected when investing.

Check combined exposure before adding another fund. Multiply each scheme’s stock weight by the amount you hold in that scheme, then add the results. Two funds can look different by name while leaving a substantial part of your money dependent on the same banks or automobile companies.

Track position size as well as buying activity. An addition that raises a small holding to a still-small weight means something different from an addition to an already concentrated investment. Look for changes that materially alter the scheme, then follow them across subsequent disclosures.

Connect the holdings to business evidence. For bank exposure, follow funding costs, margins and loan quality. For automobile exposure, examine demand and profitability together. For property exposure, watch collections and execution; for pharmaceuticals, distinguish reported earnings from adjusted measures and examine regional performance.

Keep the reporting delay in mind. A September holding is not proof that the manager still owns the same quantity in November. The disclosure does not reveal the average purchase price, all trades during the month or the conditions under which the manager might sell.

These limits are particularly relevant when copying individual purchases. A fund can absorb a stock-specific setback within a wider portfolio, while an investor copying a few visible names may create a much larger concentration. Use portfolio changes to understand the risk you already own and to sharpen your research questions before drawing a conclusion about any stock.