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Equities see highest ever outflows, but AUM scales new highs to INR30t

Key observations

The Nifty surpassed the 13,000 mark in Nov’20 to reach record highs after a 3.5% rise in Oct’20. It ended 11.4% higher MoM in Nov’20 to close at 12,969. The rally was propelled by strong FII inflows, a good corporate earnings season, and trends from the festive season, which indicate continued demand recovery. FII and DII showed record inflows and outflows, respectively

Investors capitalized on the market rally to book profits, which paved the way for another round of outflows in the equities category. Equity AUM (incl. ELSS and index funds) of domestic MFs increased 10.4% MoM to INR9t in Nov’20, led by a rise in market indices (Nifty +11.4% MoM). Notably, the month saw an decrease in sales of equity schemes (down 18.4% MoM to INR149b). Further, the pace of redemptions picked up to INR281b (up 26.7% MoM), leading to the highest ever net outflows to INR132b in Nov’20 – the fifth consecutive month of outflows.

MF industry’s AUM scaled new highs to reach INR30t in Nov’20 (+6.3% MoM), primarily led by an increase in AUM of equity funds (INR847b), income funds (INR584b), and other ETF funds (INR234b). Contribution from systematic investment plans (SIPs) slipped to INR73b (down 6.4% MoM, 11.7% YoY) – the lowest in 30 months.

Some interesting facts

* Nov’20 saw notable change in the sector and stock allocation of funds. On an MoM basis, the weights of Private Banks, NBFCs, PSU Banks, Capital Goods, Metals, and Automobiles increased. while the weights of Oil & Gas, Technology, Consumer, Healthcare, Chemicals, Telecom, Cement, Utilities, and Retail moderated.

* NBFCs’ weight increased for the second consecutive month to a nine- month high of 8.9% (+70bp MoM, -30bp YoY). The sector now ranks third in the allocation of mutual funds – it was in the sixth position a month back.

* Private Banks continues to be in the limelight and saw an increase in weights for the second consecutive month (+130bp MoM to 18.7%).

* Oil & Gas weight reached nine-month lows of 7.6% (-90bp MoM and YoY). As a result, the sector slipped to the sixth position in the allocation of mutual funds.

* In terms of value increase MoM, 8 of the top-10 stocks were from Financials: HDFC Bank (+INR144.2b), ICICI Bank (+INR105.5b), SBI (+INR64.2b), Bajaj Finance (+INR52.7b), HDFC (+INR50.5b), Axis Bank (+INR46.6b), Kotak Mahindra Bank (+INR35.7b), and Chola Invest. & Fin (+INR20.2b).

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