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Positive trends to support earnings

The overall trends have remained positive for the asset management industry in FY22 thus far. There have been positive flows in equity, passive and hybrid funds with increase in systematic investment (SIP) flows as well as folios. New fund offerings (NFOs) have also been healthy especially in multi-cap, sector/ thematic and fund of funds segments.

Retail equity sentiment continues to remain positive:

Overall flows into mutual fund schemes turned negative in May’21 (Rs386bn) due to outflows in liquid funds (Rs527bn offset by positive flows into equity/hybrid/passive of Rs92bn/86bn/69bn). However, retail sentiment continued to remain positive as flows into equity schemes came in at Rs92bn in May’21 (ex-Index funds & other ETFs) and have been positive for third consecutive month and highest in past 14 months. Flows into hybrid schemes (Rs86bn in May’21) continue to see growth momentum while flows in passive funds improved sequentially to Rs69bn.

NFOs have been healthy in 2021:

Between Jan’21 & May21, MFs have been able to garner Rs183bn through NFOs of which equity / debt / fund of funds / index fund schemes contributed Rs81bn / Rs39bn / Rs31bn / Rs9bn, respectively. Fund of funds category includes funds that offer international exposure to domestic investors. Within equity, multi cap (Rs19bn) and sectoral/thematic (Rs48bn) saw maximum fund mobilisation.

SIP flows came in at Rs88bn in May’21:

SIP net flows have improved from Rs73bn in Nov’20 to Rs88bn in May’21. This has taken the overall SIP AUM to Rs4.7trn as of May21. The number of SIP accounts has increased from 31mn in March 20 to 37.3mn in March 21 to 38.8mn in May 21. The average ticket size of SIPs stood at Rs2,457 in FY22-TD compared to Rs2,532 in Mar’21.

Possible changes that can make NPS more attractive:

Based on the media report (link1), there are ongoing deliberations to make NPS scheme more investor-friendly. These include changes in tax regime, launching systematic withdrawal plans and indexing annuities to inflation to offer higher returns. There have also been suggestions to increase annual tax benefit to Rs100,000 vs current limit of Rs50,000 per annum. As per another media article (link2), PFRDA has allowed NPS subscribers with savings up to Rs5,00,000 to take the entire amount at retirement without mandating any investment in annuities. Earlier this facility (without annuity rider) was available only for withdrawal of NPS corpus of up to Rs2,00,000. PFRDA has also revised the premature withdrawal limit on a lump sum basis from Rs1,00,000 to Rs2,50,000. Maximum entry age to avail the benefit has also been risen to 70yrs against 65yrs earlier. Positive changes in NPS scheme can benefit UTI the most (Rs1.76trn AUM).

Market share declines marginally for HDFC AMC and UTI AMC; NAM witnesses marginal gain:

Based on ending AUM and compared to FY21 levels, HDFC AMC’s overall market share as on May’21 dipped marginally to 12.5% vs 12.8% as on Mar’21, Similarly UTI AMC’s market share has declined from 5.8% to 5.6%. NAM’s overall market share improved from 7.2% as on Mar’21 to 7.3% as on May’21. In terms of equity market share, HDFC AMC’s market share dipped 28bps to 12.8% while NAM and UTI AMC market share remained stable at 6.9% and 4.7%, respectively. In terms of debt market share, NAM’s market share improved from 6.7% in Mar’21 to 7.2%, while HDFC AMC’s market share remained stable at 14.2% and UTI AMC’s market share declined from 4% to 3.8%. CAMS market share stood at 69% in May’21 (70.8% including Franklin Templeton MF).

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