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5 Mutual Funds with High Exposure to EV Stocks

Aug 23, 2022

5 Mutual Funds with High Exposure to EV Stocks

Editor's note: Auto stocks are making a strong comeback in the market.

Among them, companies focused on electric vehicles (EVs) deserve a special mention. It's been an exciting time to track India's EV landscape. The fundamentals of the sector have improved considerably of late.

In mid-March, we wrote to you about 5 mutual fund schemes betting big on the prospects of EVs in India.

It's interesting to check whether the fund managers of these five mutual fund schemes have increased their exposure to the EV theme over the last 4-5 months.

PersonalFN found that a few funds betting big on the EV theme have increased their exposure during the correction. Others have reshuffled their portfolios by trimming some stocks and adding new ones.

Continue reading to know more...

Indian Mutual Funds Betting Big on EV Stocks

India's top EV stocks became popular with investors much before auto firms and consumers could give them a thumbs up.

Although just 3.3 lakh new EVs hit the Indian roads in 2021, it was a 168% increase year-on-year. Two-wheeler and three-wheeler EVs grew 48% and 47% Y-o-Y respectively. The passenger EV registrations grew just 4%.

This picture is likely to change in the foreseeable future, of course for the better!

According to an EY-IVCA-IndusLaw report titled 'Electrifying Indian mobility: Accelerating the pace of electric mobility', the contribution of EVs to total automobile sales will increase from 1.6% in 2021 to 39% by 2027.

The government has shown a serious intent to decarbonise India's logistics and mobility sector, making it faster, better, and self-reliant.

Going by recent developments, it appears that EV adoption in India is at an inflection point. The sector is entering a phase of mass adoption with Original Equipment Manufacturers (OEMs) and ancillary companies rolling out multi-year EV plans.

Maruti Suzuki is set to launch its first EV in 2025.

Mahindra & Mahindra recently unveiled its plan to launch five e-SUVs over the next 4-5 years under two brands - XUV and BE. The e-SUVs are likely to account for 25% of the company's SUV revenue by 2027.

As Nitin Gadkari, the Minister for Road Transport and Highways and Shipping, said, the government envisions 30% EV penetration in the Passenger Vehicle segment, 70% in the Commercial Vehicle segment, and 80% in the two-wheeler and three-wheeler segments by 2030.

Also, to make EVs more affordable to Indian customers, the government is aiming to bring down the cost of EVs at par with that of petrol vehicles within a year.

This parity appears impossible without subsidies and incentives for EV manufacturing. The central and state governments seem to be taking concerted efforts to make EVs mainstream.

And it's not just about new EV registration. The entire EV ecosystem is gearing up for making mobility more sustainable, advanced, and indigenised.

Recently, Reliance New Energy Limited, Ola Electric Mobility, and Rajesh Exports Limited inked an agreement with the government to undertake battery manufacturing under Production Linked Incentive (PLI) Scheme for Advanced Chemistry Cell (ACC) Battery Storage.

From just 1,742 in March 2022, EV charging stations are expected to grow to nearly one lakh by 2027.

A clear trend is emerging. EVs are set to drive in the fast lane.

One way to profit from this trend is mutual funds that are investing in EV stocks.

In this article, we will look at some diversified equity mutual funds with high exposure to EV stocks.

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#1: ITI Large Cap Fund

ITI Large Cap Fund was launched in December 2020. The fund aims to invest in good quality, scalable businesses with the ability to withstand business cycles and market shocks.

Update: In line with its investment mandate, ITI Large Cap Fund invested 94.7% of its assets in largecaps and 4.3% in midcaps as per its portfolio as of 31 July 2022.

It has no allocation to small-cap stocks. It holds a portfolio of 42 stocks, including about 5 EV-related stocks. In February, ITI Large Cap Fund held 10 EV stocks in its portfolio. It seems the fund has followed the sell-on-rallies strategy for EV stocks.

Table 1: Top EV stock holdings of ITI Large-cap Fund

Stocks % of Assets
Reliance Industries Ltd. 8.11
NTPC Ltd. 2.21
Eicher Motors Ltd. 1.80
Hero MotoCorp Ltd. 1.16
Hindalco Industries Ltd. 0.74
Data as of 31 July 2022
(Source: ACE MF, PersonalFN Research)

ITI Large Cap Fund's EV-related portfolio accounted for nearly 23% of its assets in February 2022. However, according to the portfolio as of July 2022, the fund has trimmed down its EV exposure to 14%.

It has exited some leading companies including the likes of Mahindra & Mahindra, Tata Motors, Bajaj Auto, Tata Power, IOC, and ONGC, among others.

The latest portfolio has only a handful EV stocks. And a majority of its exposure is restricted to Reliance Industries. The other stocks are Eicher Motors, NTPC, and Hero MotoCorp.

It's also reduced its exposure to a leading aluminium maker, Hindalco.

#2: Templeton India Value Fund

This scheme was launched in September 2003 as Templeton India Growth Fund. But it has always followed a value style of investing. It was rechristened as Templeton India Value Fund after SEBI's re-categorisation and rationalisation norms.

It invests in undervalued companies which offer the potential to generate wealth over the long term in the form of capital appreciation.

Update: As per its portfolio as of 31 July 2022, Templeton India Value Fund held 38 stocks with around 66% of its net assets in largecaps, about 9% in midcaps, and about 13% in smallcaps. Of the total, around 8 stocks are from the EV theme accounting for 19.4% of its portfolio.

Table 2: Top EV stock holdings of Templeton India Value Fund

Stocks % of Assets
NTPC Ltd. 4.12
Bharat Electronics Ltd. 3.90
Tata Motors Ltd. - DVR Ordinary 3.13
Bajaj Auto Ltd. 2.22
Bharat Petroleum Corporation Ltd. 1.87
Data as of 31 July 2022
(Source: ACE MF, PersonalFN Research)

The EV portfolio of Templeton India Value Fund includes auto OEMs such as Tata Motors and Bajaj Auto, and EV charging infrastructure providers such as NTPC, Indian Oil Corporation, Power Grid Corporation, and Bharat Petroleum Corporation.

Apart from this, its portfolio includes Bharat Electronics, an electronic products manufacturer, as well as Exide Industries, an EV battery maker.

The fund exited from Mahindra and Mahindra in March and hasn't re-entered until July 2022.

#3: Axis Value Fund

Axis Value Fund was launched in September 2021. The fund aims to generate consistent long-term capital appreciation by investing predominantly in equity and equity-related securities by following a value investing strategy.

Update: While following this strategy, Axis Value Fund holds a diversified portfolio. As per its portfolio as of 31 July 2022, it has an allocation of around 62% to largecaps, around 17% to midcaps, around 11% to smallcaps, and the balance in cash and others.

Table 3: Top EV stock holdings of Axis Value Fund

Stocks % of Assets
Tata Motors Ltd. 7.82
Mahindra & Mahindra Ltd. 6.37
Minda Corporation Ltd. 1.98
Hindalco Industries Ltd. 1.28
Bharat Petroleum Corporation Ltd. 1.28
Data as of 31 July 2022
(Source: ACE MF, PersonalFN Research)

The Axis Value Fund currently has 33 stocks in its portfolio, of which 8 are EV-related. Its EV portfolio currently accounts for about 22% of its assets, with names such as Tata Motors and Mahindra & Mahindra as its top allocations.

Further, the fund is invested in auto ancillaries such as Minda Corporation, Mahindra CIE Automotive and Suprajit Engineering.

The fund also has exposure to EV commodity stocks as well as charging and EV infrastructure stocks such as Hindalco Industries, Bharat Petroleum Corporation, and Tata Power Company.

#4: L&T Large & Midcap Fund

Launched in May 2006 as L&T India Special Situations Fund, this scheme was rechristened and recategorised as a Large & Midcap Fund, after SEBI's mutual fund categorisation and rationalisation norms.

The fund aims to generate long-term capital growth from a diversified portfolio of predominantly equity and equity-related securities with a minimum allocation of at least 35% each in large-cap and mid-cap companies.

Update: As per the portfolio as of 31 July 2022, L&T Large & Midcap Fund held an allocation of around 50% to largecaps, around 38% in mid-caps, around 10% in smallcaps, and the balance in cash and others.

Table 4: Top EV stock holdings of L&T Large & Midcap Fund

Stocks % of Assets
Motherson Sumi Wiring India Ltd. 2.62
UNO Minda Ltd. 2.39
ABB India Ltd. 1.75
NTPC Ltd. 1.69
Reliance Industries Ltd. 1.50
Data as of 31 July 2022
(Source: ACE MF, PersonalFN Research)

L&T Large & Midcap Fund holds a fairly diversified portfolio of 59 stocks of which 15 are EV-related accounting for about 18.4% of its assets.

The fund's EV portfolio includes auto OEM and ancillaries such as Tata Motors, Eicher Motors, TVS Motors, Ashok Leyland, Escorts Kubota,Sona BLW Precision Forgings, Motherson Sumi Wiring India, Schaeffler India, and Uno Minda.

It has exposure to the charging infrastructure space with holdings in Reliance Industries, NTPC, ABB, and Tata Power Company.

It has invested in companies such as Tata Elxsi that develop software and other similar solutions for EVs.

It also holds Tata Chemicals and Neogen Chemicals that provide chemicals used in lithium-ion cell technology, battery recycling, and battery production.

Over the last few months, the scheme has added a number of EV stocks to its portfolio such as ABB, NTPC, Eicher Motors, Bharat Electronics, Ashok Leyland, TVS Motors, and Escorts Kubota, among others. On the other hand, the fund exited from Tata Motors, Tata Power, and L&T Technology Services.

#5: Quantum Long Term Equity Value Fund

Categorised as a Value Fund, Quantum Long Term Equity Value Fund was launched in March 2006.

The fund aims to invest in companies that can benefit from the anticipated growth and development of the Indian economy and its markets by following a bottom-up approach to stock picking.

Update: As per its portfolio as of 31 July 2022, Quantum Long Term Value Fund held an equity allocation of nearly 79% in largecaps and about 14% in midcaps and 4% in smallcaps. Some portion was in cash and cash equivalents.

Table 5: Top EV stock holdings of Quantum Long Term Equity Value Fund

Stocks % of Assets
Mahindra & Mahindra Ltd. 5.21
Eicher Motors Ltd. 4.18
Hero MotoCorp Ltd. 3.84
Bajaj Auto Ltd. 3.71
NTPC Ltd. 3.17
Data as of 31 July 2022
(Source: ACE MF, PersonalFN Research)

Quantum Long-Term Equity Value Fund holds a compact portfolio of 30 stocks of which around 8 are EV-related accounting for 23.8% of its assets.

The fund's EV portfolio constitutes mainly of auto OEMs such as Mahindra & Mahindra, Bajaj Auto, Hero MotoCorp, and Eicher Motors.

Other than these stocks, the fund has exposure to EV charging infrastructure providers such as NTPC, ONGC, and Power Grid Corporation of India, along with battery maker Exide Industries.

Outlook for the EV sector in India

As you might be aware, India amounts for nearly 7% of carbon emissions globally. ICE engine vehicles are responsible for nearly 40% pollution in India. Thus, faster EV adoption is extremely crucial.

The government has already rolled out PLI schemes incentivising not just EV production but the creation of the entire EV ecosystem. Over the next few years, we might start seeing the results at the grassroots level.

Also, according to Ministry of Skill Development and Entrepreneurship, EV sector is expected to create 10 million direct and 50 million indirect jobs. According to the Council on Energy, Environment and Water (CEEW), India may save up to US$ 14 bn on oil imports if it achieves at least 30% EV penetration by 2030.

Thus, achieving EV targets is not just a sector-specific phenomenon; it will always remain a priority on the national agenda for years to come.

India would stand to benefit from its relative abundance of renewable energy resources plus the availability of skilled manpower in R&D, technology, and manufacturing.

It's likely that many new players will enter the market to ride the EV wave. This will increase competition and make EVs more affordable.

Mutual funds are one of the best ways to benefit from India's growth story. Just ensure that you select the best and the most suitable mutual fund schemes for your portfolio.

Investment in securities market are subject to market risks. Read all the related documents carefully before investing

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This article has been authored by PersonalFN exclusively for PersonalFN is a Mumbai-based Financial Planning and Mutual Fund research firm known for offering unbiased and honest opinions on investing.


Which are the top electric vehicles companies in India?

Based on marketcap, these are the top electric vehicles companies in India:

You can see the full list of electric vehicles stocks here.

And for a fundamental analysis of the above companies, check out Equitymaster’s Indian stock screener which has a separate screen for best electric vehicle companies in India.

What are the top gainers and top losers within the electric vehicles sector today?

Within the Electric Vehicle sector, the top gainers were GABRIEL INDIA (up 2.2%) and SONA COMSTAR (up 2.1%). On the other hand, HERO MOTOCORP (down 1.0%) and MINDA CORPORATION (down 0.9%) were among the top losers.

For more, please visit the BSE auto index live chart and also check out our automobile sector report.

How should you value electric vehicles companies?

Investing in stocks requires careful analysis of financial data to find out a company's true worth. However, an easier way to find out about a company's performance is to look at its financial ratios.

Two commonly used financial ratios used in the valuation of stocks are -

Price to Earnings Ratio (P/E) - It compares the company's stock price with its earnings per share. The higher the P/E ratio, the more expensive the stock.

Price to Book Value Ratio (P/BV) - It compares a firm's market capitalization to its book value. A high P/BV indicates markets believe the company's assets to be undervalued and vice versa.

To know more about the automobile sector's past and ongoing performance, have a look at the performance of the NIFTY Auto Index and BSE Auto Index.

Where can I find a list of electric vehicle stocks?

The details of listed electric vehicle companies can be found on the NSE and BSE website.

For a curated list you can check out our list of electric vehicle stocks.

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