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Equity inflows witness a slowdown; Banks and Automobiles hog the limelight

Key observations

The Nifty continued to clock fresh highs (18,604) in Oct’21. The index oscillated ~1,150 points before closing 54 points (or 0.3%) higher MoM at 17,672. The index is up 30% in CY21 YTD. The increase in volatility was on the back of weak global cues, stretched valuations, and FIIs turning net sellers. FII outflows stood at USD2.3b after two consecutive months of inflows. DIIs saw inflows for the eighth consecutive month at USD0.6b.

However, investors have capitalized on the rally to book profit and rebalance their portfolio as the market continues to clock record highs, leading to moderation in domestic mutual fund (MF) flows. Investors continued to invest in MFs, with inflows and contributions in systematic investment plans (SIPs) touching fresh highs of INR105.2b in Oct’21 (up 1.6% MoM and 34.9% YoY).

Equity AUM (including ELSS and index funds) of domestic MFs increased by 1.5% MoM to INR13.5t in Oct’21. This was on account of a marginal rise in market indices (Nifty up 0.3% MoM) and decrease in redemptions (down 21.7% MoM to INR245b). Equity scheme sales decreased by 19% MoM to INR331b. This led to a moderation in net inflows to INR86b in Oct’21 (v/s INR96b in Sep’21), marking the eighth consecutive month of inflows.

Total MF industry AUM rose (1.6% MoM) to INR37.3t in Oct’21, led by a MoM increase in the AUM of equity/income/balanced funds (INR205b/INR200b/INR144b). The AUM for liquid/arbitrage funds declined by INR52b/INR20b MoM.

Some interesting facts

* The month saw notable changes in the sector and stock allocation of funds. On a MoM basis, the weightage of Banks (Private and PSU), Automobiles, Capital Goods, Cement, and Retail increased, while that for Healthcare, Consumer, Utilities, Oil and Gas, Technology, Chemicals, Infrastructure, and Consumer Durables moderated.

* Private Banks’ weightage at a five-month high of 17.7% (+90bp MoM; +10bp YoY). The sector was at a 29-month low in Sep’20.

* PSU Banks’ weightage at a 20-month high of 3.5% (+30bp MoM; +150bp YoY).

* Healthcare’s weightage moderates for the third consecutive month, at a 20-month low of 6.9% (-30bp MoM and -150bp YoY).

* In terms of a value increase MoM, four of the top 10 stocks were from BFSI: ICICI Bank (+INR165.1b), SBI (+INR51.1b), ICICI Lombard General Insurance (+INR15.4b), and HDFC (+INR11.7b).

* Stocks that exhibited a maximum decline in value MoM: TCS (-INR21.7b), IRCTC (-INR21.6b), NTPC (-INR19.9b), Coal India (-INR16.1b), and HUL (- INR15b).

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