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FUND FOLIO (June 2021): Equity inflows pick up; AUM reaches INR11t to achieve another milestone

Key observations

* After consolidating in Apr’21 (down 0.4% MoM), the Nifty headed north in May’21 (up 6.5% MoM) to close at an all-time high of 15,583. The rally was propelled by strong FII inflows in the second half of the month and steady decline in daily COVID-19 cases in India, as well as supported by strength in other Asian stock markets. FII inflows were back and stood at USD0.7b. DIIs saw inflows for the third consecutive month at USD0.3b.

* Equity AUM (incl. ELSS and index funds) of domestic MFs increased 7.7% MoM to INR11.1t in May’21. This was on account of a rise in market indices (Nifty up 6.5% MoM) and an increase in equity scheme sales (up 15% MoM to INR277b). Furthermore, redemptions decreased 18.6% MoM to INR172b. This led to an increase in net inflows to INR105b in May’21 – the highest since Mar’20.

* The MF industry’s total AUM increased 2.1% MoM (INR0.7t) to INR33.1t in May’21, primarily led by a MoM increase in AUM of equity funds, other ETF funds, and balanced funds. Notably, liquid funds and income funds posted a decrease MoM.

Some interesting facts

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

* PSU Banks’ weight reached 15-month highs of 3.4% (+30bp MoM; +120 YoY). As a result, the sector – which was in the thirteenth position a year ago – climbed to the ninth position in the allocation of mutual funds.

* Oil & Gas’ weight increased for the second consecutive month to 7.1% (+10bp MoM). The sector now ranks fifth in the allocation of mutual funds – it was in the third position a year ago.

* Metals’ weight – after reaching a 29-month high in April’21 – moderated to 3% (-20bp MoM; +100bp YoY) in May’21.

* In terms of value increase MoM, 6 of the top 10 stocks were from BFSI: SBI (+INR76.1b), HDFC Bank (+INR73.4b), ICICI Bank (+INR72.1b), HDFC (+INR31.4b), SBI Life Insurance (+INR26.2b), and Axis Bank (+INR19.1b).

* Stocks that exhibited maximum decline in value MoM: JSPL (-INR9.8b), Cholamandalam Inv. & Fin. (-INR7.3b), Deepak Nitrite (-INR5.0b), Tata Chemicals (-INR4.7b), and Britannia Inds (-INR4.4b).

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