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FUND FOLIO (April 2021): Equity AUM up 67% YoY in FY21, records first net outflows in seven years

* The Nifty ended FY21 with stellar (71%) returns. The returns look stellar due to the low base of FY20, when the market fell 26%. The market delivered positive returns in all four quarters of FY21. FII flows into equities in FY21 were the highest ever at USD37.3b, while DII saw outflows after five consecutive years of inflows. Domestic investors have capitalized on the market rally to book profit and rebalance the portfolio as the market continues to achieve new highs, leading to moderation in domestic mutual fund (MF) flows.

* Equity AUM (including ELSS and index funds) of domestic MFs reached new highs of INR10.2t (+67% YoY) in FY21, led by a rise in market indices (Nifty +71% YoY). The year saw a decline in sales of equity schemes (down 7% YoY to INR2,306b). The pace of redemptions picked up to INR2,653b (up 64% YoY), leading to the first ever net outflows in seven years at INR347b in FY21.

* The MF industry’s total AUM increased 41% YoY (INR9.2t) to INR31.4t in FY21, led by an increase in Equity funds (INR4,092b), Income funds (INR2,392b) and other ETFs (INR1,295b).

Some interesting facts

* The year saw a notable change in the sector and stock allocation of funds. The weightage of domestic Cyclicals increased by 160bp to 58%, led by an increase in the weightage of Automobiles, NBFCs, Cement, Real Estate, Chemicals, and Infrastructure (refer to page four for detailed charts).

* Weightage of Defensives decreases 100bp to 32.5%, led by Consumer, Utilities, and Telecom. Global Cyclicals’ weightage, too, fell 60bp to 9.5%.

* Technology saw a massive rise in weightage in FY21 to 11.9% (+300bp YoY). The sector is now the second in terms of sectoral allocation by MFs. It was in the third position 12 months ago.

* Consumer slipped to fourth place from second place a year ago, with a 240bp decrease in weightage to 7.4%.

* Metals improved its position to 14 from 16 a year ago, with the weightage increasing by 80bp to 2.6%.

* In terms of value increase MoM, three of the top five stocks were from Technology: Infosys (+INR70b), TCS (+INR39.6b), and HCL Tech (+INR16.9b).

* Stocks exhibited a maximum decline in value MoM: Reliance Industries (-INR30.6b), SBI (-INR29.3b), ICICI Bank (-INR27.4b), HDFC Bank (-INR19.5b), and Axis Bank (-INR19.3b).

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