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Feb’20 mutual fund tracker: More cash before the market crash
Strong inflows; higher cash levels: A lot has changed in global and Indian equity markets over the last couple of weeks, rendering in large part the mutual funds holding data of Feb’20 outdated. However, it still is worth taking stock of the industry positioning before the crash started. Inflows into equity funds picked up sharply in the month to Rs87bn, a 15-month high. This showed up as an increase in cash levels after four months of reduction in cash holding.
FMCG continued to attract flows, Cap goods sees outflows: In a clear change in stance, we see that cap goods - which is the highest overweight position for MFs (stock) - is also seeing the highest selling (flow). Till a couple of months ago, Cap goods were seeing strong buying. In the meanwhile, FMCG is currently UW but saw the highest increase in weight (buying). This incremental change is in line with our EAP positioning. Among other sectors, Pharma has seen a meaningful increase in weights, while Auto has seen a decrease during the month.
Top large-cap Buys - Avenue/Bharti/HUL: Large-cap funds saw buying in Avenue Supermart, Bharti and HUL. Selling was seen in L&T, HDFC and IT. Mid-cap funds bought Trent, Max Fin and Ipca labs, while they sold LICHF, ACC and Sundaram Fasteners.
Global sell-off could continue: We believe that the current risk-off sentiment globally could continue till Covid-19 new case count peaks in the Western world. In the meanwhile, the outbreak is starting on community spread phase in India, prompting containment measures. While defensives are good places to hide in such scenario, there are some deep discount opportunities opening up (see our report). For the MF industry, the behavior of inflows during these times will be an interesting test of the maturity levels of the retail investor.
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