Top 5 Mutual Funds with High Allocation to Tata Stocks

August 21, 2023 Mutual Fund

A report by Brand Finance, one of the world’s leading brand valuation consultancy stated that “Amidst the post-pandemic landscape and geopolitical uncertainties, India’s top 100 most valuable brands have collectively exhibited growth, with their total value approaching $2 trillion since the last valuation on January 1, 2022,”.

According to the report, the salt-to-software conglomerate Tata Group has maintained its dominance as India’s most valuable brand and has surpassed the $25 billion mark.

About Tata Group Companies

The Tata Group was established in 1868 by Mr Jamsetji Nusserwanji Tata, the founder, who began with a textile mill in central India in the 1870s. It is one of India’s oldest and largest enterprises. His vision helped India advance into the ranks of industrialised nations, influenced the steel and power industries, and laid the groundwork for technical education.

Tata was first established as a trading company before expanding into the steel, automobile, telecommunications, and hospitality industries. The first integrated steel factory in India was Tata Steel, which was established in 1907 and swiftly rose to prominence in the global steel industry. The stories about the achievements of the Tata Group stretch beyond business.

Under Mr Ratan Tata’s inspirational leadership, the company experienced tremendous development and international expansion. In the software industry, Tata Consultancy Services (TCS), the company’s branch for IT services and consulting, has risen to the top. The Tata Group’s past demonstrates that it presently operates in more than 100 countries and a wide range of industries. The Tata Group, which continues to stand for Indian entrepreneurship and its influence on the global arena, is famous for its moral principles and compassion.

Should one consider investing in Tata Group stocks?

Tata Group’s brand value has increased 10.3% from the previous year to $26.4 billion, making it the first Indian brand to reach such a high valuation. The only Indian brand to rank in the top 100 of the ‘Brand Finance Global 500’ in 2023 is The Tata Group.

The Tata Group’s expansion is largely attributable to the strategic change it underwent over the previous two years, which involved embracing digitalization and using technology across a wide range of its broad business. The organisation has long been a pioneer in promoting community welfare and sustainability, leading by example even before it became a popular topic of conversation on a global scale. Notably, the Tata Group has pulled off the incredible achievement of being placed 49th worldwide in terms of sustainability perceptions value.

For the first time in FY 2022-23, the combined revenue of the listed companies in the Tata Group, led by Tata Motors and Tata Consultancy Services (TCS), exceeded Rs 10 trillion.

In the first half of 2023, the majority of Tata Group stocks have performed well as compared to the benchmark S&P BSE Sensex. As a result, the combined market capitalisation of Tata Group companies soared nearly 9% year-to-date to Rs 22.87 lakh crore on June 30, 2023. Thus, investors’ interest in Tata Group equities has increased.

However, many investors are hesitant about investing in direct equities or stocks, due to their highly risky and volatile nature. Mutual funds are a good option when an individual is keen on investing in particular stocks but is risk-averse. Investors may consider investing indirectly in their preferred stocks like ‘Tata Stocks’ via mutual funds.

[Read: 5 Effective Ways to Track Your Mutual Fund Investment Performance]

Invest in Tata Stocks with Low Risk Through Mutual Funds

Now as compared to direct equities mutual funds do carry a lower risk, but it is important to remember that all market-linked investments are risky and can lose value if the overall market declines or any of the sectors or businesses to which they have a higher exposure goes out of favour.

Tata Asset Management (Tata AMC), often known as Tata Mutual Fund, is a member of the Tata Group and was established in 1994. It has over 25 years of investment management experience. It provides investors with a variety of investment options to meet their needs based on their risk tolerance and financial goals.

Having said that, Tata Consultancy Services (TCS), Tata Motors, Titan Company, Tata Steel, and The Indian Hotels were the top five mutual fund stock bets on Tata Group Companies in recent months. According to statistics provided by PRIME Database (India’s primary source of capital market data), mutual funds had exposure to the top five Tata Group companies worth Rs 89,107 crore. Other group stocks where domestic fund managers have considerable exposure in value terms for mutual fund schemes include Tata Communications, Tata Chemicals, Tata Power, and Tata Elxsi.

The stock of the nation’s largest automaker Tata Motors has increased dramatically so far in 2023 after plunging sharply the previous year. The Indian Hotels Company, Orient Hotels, Trent, Tata Communications, Tejas Networks, and Tata Elxsi, among other significant enterprises in the Tata Group, all experienced reasonable gains between January to June 2023.

Investors who desire exposure to these Tata Group stocks may think about investing in mutual fund schemes with higher allocations to these businesses. This will free up investors from worrying about the significant risk associated with investing in direct equities and allow them to purchase shares of Tata Group companies and benefit from their growth potential. Additionally, rather than investing in each ‘Tata stock’ separately, one can allocate their assets to multiple ‘Tata Stocks’ collectively by investing in mutual funds.

[Read: How to Choose Mutual Funds For Your Investment Portfolio]

This article elucidates the top mutual funds to invest in 2023 that have a high allocation to ‘Tata stocks’ or stocks of Tata Group Companies:

#1 – Tata Digital India Fund (Sectoral Fund)

Tata Digital India Fund invests in equity/equity-related instruments of the companies in the information technology sector in India. The scheme invests across the market cap, and as of July 2023, it holds 72.76% allocation in large caps, 9.28% allocation in mid-caps and 9.87% in small caps.

Tata Digital India Fund – Allocation to Tata Stocks

Data as of July 31, 2023
(Source: ACE MF) 

Tata Digital India Fund holds maximum exposure in stocks of TCS Ltd., which is a global leader in IT services, consulting, and business solutions, leverages technology for business transformation and helps catalyse change. It holds a market capitalization of Rs 12.33 trillion as of July 2023. Currently, the overall exposure to Tata stocks accounts for 18.79% of the scheme’s assets.

#2 – Quantum India ESG Equity Fund (Thematic Fund)

Quantum India ESG Equity Fund invests predominantly in stocks of companies that meet Quantum’s Environment, Social and Governance (ESG) criteria. Launched in July 2019, it currently has an AUM of Rs 70.90 crore and is benchmarked against NIFTY100 ESG- TRI.

Quantum India ESG Equity Fund – Allocation to Tata Stocks

Data as of July 31, 2023
(Source: ACE MF) 

The scheme invests across the market cap, and as of July 2023, it holds 63.34 % allocation in large caps, 24.44% allocation in mid-caps and 6.89% in small caps. Quantum India ESG Equity Fund holds fair exposure in stocks of Tata Group Companies across the sectors. Currently, the overall exposure to Tata stocks accounts for 16.86% of the scheme’s assets.

#3 – ICICI Pru Technology Fund (Sectoral Fund)

Launched in 2013, ICICI Pru Technology invests in a concentrated portfolio of equity and equity-related securities of technology and technology-dependent company companies. As of July 2023, the fund has 64.44% in large caps and 11.58% in mid-cap stocks and 12.44% in small-cap stocks.

ICICI Pru Technology Fund – Allocation to Tata Stocks

Data as of July 31, 2023
(Source: ACE MF) 

ICICI Pru Technology Fund has an overall allocation of 15.16% to Tata stocks. The highest exposure is in TCS Ltd. a pioneer in the IT sector in India. Being a sectoral fund, the other major allocations are to giants from the technology industry like 28.11% to Infosys Ltd., 8.47% to Bharti Airtel Ltd., 7.17% to HCL Technologies Ltd. and so on. The scheme currently has an AUM of Rs 10,722.32 crore.

#4 SBI Technology Opp Fund (Sectoral Fund)

The scheme endeavours to create a substantially diversified portfolio of equity and equity-related securities in technology and technology-related companies. The scheme endeavours to benefit from the opportunities in the technology sector and currently holds an AUM of Rs 3080.82 crore.

SBI Technology Opp Fund – Allocation to Tata Stocks

Data as of July 31, 2023
(Source: ACE MF) 

In terms of Tata stocks, SBI Technology Opp Fund holds a major allocation of around 14.21% each in TCS Ltd. and the fund also has exposure to a few other Tech-oriented companies. It includes 25.08% to Infosys Ltd., 10.11% to Bharti Airtel Ltd., 7.16% to Tech Mahindra Ltd. and so on. The scheme invests across market segments such as – 64.43% allocation into large-cap stocks, 11.58% and 12.44% in mid and small-cap stocks respectively.

#5 Tata Quant Fund (Thematic Fund)

Launched a few years back in January 2020, Tata Quant Fund invests in equity and equity-related instruments selected based on a quantitative model (Quant Model). Tata Quant Fund has an overall allocation of 12.87% to Tata stocks.

Tata Quant Fund – Allocation to Tata Stocks

Data as of July 31, 2023
(Source: ACE MF) 

Tata Quant Fund holds 96.7% exposure to equities, of which 62.45% is in large caps and 34.17% is in mid-caps. The overall allocation to Tata stocks is around 12.87%, and the highest is in stocks of TCS Ltd. (considered a market leader in the Indian IT industry). The scheme also had an allocation to Tata Consumer Products Ltd. However, as of July 2023, it has been removed from the holdings.

[Read: How to Strategically Approach Equity Mutual Funds in Volatile Markets]

To summarise…

All things considered, the Tata Group of Companies is predicted to have strong development potential, making it a solid investment option for individual investors looking for long-term capital growth. By investing in Tata Group stocks through mutual funds, investors can obtain exposure to one of India’s top companies that has successfully captured a large market across numerous industries. However, it is crucial to conduct thorough research on the holding Tata Group Companies and the performance of the mutual fund schemes before making an investment.

This article first appeared on PersonalFN here