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FUND FOLIO (July 2021): Equity inflows see slowdown; Technology, Capital Goods in the limelight

Key observations - 

* The Nifty reached a fresh high of 15,916, ending Jun’21 ~1% higher MoM at 15,722. The rally was on the back of strong FII inflows, the recession of the second COVID wave boosting confidence in economic recovery, and an in-line earnings season. FIIs continued their buying streak at USD1.5b in Jun’21. DIIs saw inflows for the fourth consecutive month at USD1b. Midcaps/Smallcaps outperformed largecaps by 3.7%/4.1% in Jun’21.

* However, investors capitalized on the market rally to book profits and rebalance the portfolio as markets continued to achieve new highs, leading to moderation in domestic mutual fund (MF) net inflows. The contribution of systematic investment plans (SIPs) increased for the second consecutive month to INR91.6b (up 3.8% MoM, 15.6% YoY).

* Equity AUM (incl. ELSS and index funds) of domestic MFs increased 3.7% MoM to INR11.5t in June’21. This was on account of a rise in market indices (Nifty up 0.9% MoM) and an increase in equity scheme sales (up 5.7% MoM to INR292b). Simultaneously, redemptions increased 33.5% MoM to INR229b. Consequently, net inflows slowed to INR63b in June’21 from INR105b in May’21.

* The MF industry’s total AUM increased 1.9% MoM (INR0.6t) to INR33.7t in June’21, primarily led by a MoM increase in AUM of equity funds (INR413b), arbitrage funds (INR89b), and balanced funds (INR76b). Notably, liquid funds posted decline of INR106b MoM.

Some interesting facts - 

* The month saw notable changes in the sector and stock allocation of funds. On a MoM basis, the weights of Technology, Capital Goods, Healthcare, Automobiles, and Insurance increased, while the weights of Private Banks, Oil & Gas, Banks – PSU, and Telecom moderated.

* Technology continued to scale new heights as its weight increased to 11.7% (+70bp MoM; +350bp YoY).

* Capital Goods’ weight increased for the second consecutive month to a 16-month high of 5.3% (+30bp MoM; +70bp YoY).

* Private Banks’ weight hit a nine-month low to 17.2% (-80bp MoM; flat YoY).

* In terms of value increase MoM, 3 of the top 5 stocks were from Technology: Infosys (+INR82.7b), TCS (+INR32.7b), and Tech Mahindra (+INR15.8b).

* Stocks that exhibited maximum decline in value MoM: ICICI Bank (-INR25.6b), Kotak Mahindra Bank (-INR14.2b), Lupin (-INR7b), Cholamandalam Investment & Finance (-INR6.8b), and GAIL (-INR6.2b).

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