The opening of the economy post lockdown and gradual pick up in business activity has positively impacted the country's mutual fund industry.
According to Indian Mutual Fund Tracker-July 2020 by Motilal Oswal Institutional Equities, after plunging 18 per cent from Rs 27.2 lakh crore in February to Rs 22.3 lakh crore in March, total (asset under management) AUM of domestic MFs have climbed back to Rs 27.1 lakh crore in July, 2020.
The reversal of fortune for the MF industry was primarily led by equity, liquid, income, and other ETF funds.
Equity AUM (including ELSS and Index funds) of domestic mutual funds increased 5 per cent MoM to Rs 7.8 lakh crore in July, led by a rise in market indices (Nifty +7.5 per cent MoM) and a marginal increase in sales of equity schemes (up 1.8 per cent MoM to Rs 148 billion).
At the same time, redemptions increased 32.5 per cent MoM to Rs 18,800 crore, leading to net outflows to Rs 4,000 crore in July, the first in 52 months.
The Nifty has maintained its upward momentum and closed higher for the second consecutive month in Jul'20 (up 7.5 per cent MoM). Expectation of gradual demand recovery coupled with benign global backdrop aided the Nifty's north-bound journey.
Investors too capitalized on the market rally and booked profits, leading to a moderation in domestic mutual fund flows.
Contribution of systematic investment plans (SIPs) declined for the fourth consecutive month to Rs 7,830 crore (down 1.1 per cent MoM), the brokerage tracker report showed.
What is interesting, the month saw a notable change in the sector and stock allocation of funds. On MoM basis, the weights of Technology, Healthcare, Oil & Gas and Chemicals increased, while that of Private Banks, Consumer, Utilities, Capital Goods, Telecom, Retail, Automobiles and NBFCs moderated.
Technology weight increased 180bp MoM to 10.5 per cent -- a 53-month MFs saw first outflows in equity in 52 months high. The sector has climbed back to the second position in the allocation of mutual funds.
Private Bank's weight hit 22-month low to 16.2 per cent (-90bp MoM, -400bp YoY).
Oil and Gas' weight increased for the second consecutive month and climbed to a new high of 9.7 per cent (+30bp MoM, +220bp YoY).
In terms of MoM value increase, 4 of the top-10 stocks were from Healthcare: Sun Pharma, Dr. Reddy's Labs, Cipla and Divis Labs clearly indicating how Covid-19 has changed the fortunes for the segment.
Stocks exhibiting maximum decrease in value MoM were HDFC Bank, NTPC, Avenue Supermarts, HDFC and L&T.