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Equities see slowdown in outflows; Gross inflows in equities at 6-month high

After scoring a hat-trick in Aug’20, the Indian benchmark indices consolidated in Sep’20 (Nifty-50 down 1.2%) amid extreme volatility. 1HFY21 (AprSep’20) has turned out to be the best first half for the Nifty over the last decade, of course aided by the low base, post correction in Mar’20. The broadbasing of markets after almost three years of polarization augurs well even as recovery in the underlying economy takes shape. Mid and Small-Cap indices have once again outperformed the Nifty in Sep’20.

After rising 17.9% over the last three months, Equity AUM (incl. ELSS and Index funds) of domestic MFs declined a marginal 0.6% MoM to INR8.1t in Sep’20, led by the fall in market indices (Nifty -1.2% MoM). Notably, the month saw an increase in sales of Equity schemes (up 17.5% MoM to INR179b). Further redemptions also cooled off marginally and stood at INR185b (down 2.7% MoM), leading to slowdown in net outflows to INR6b in Sep’20 (v/s outflows of INR38b recorded in Aug’20).

MF industry’s AUM decreased 2.3% MoM (INR0.6t) to INR26.9t in Sep’20, primarily led by Liquid funds (INR-697b), Balanced funds (INR-78b) and Equity funds (INR-52b).

The proportion of outflows in Multi-cap schemes remained high compared to other categories (Refer page 3). This could be attributed to the market regulator circular in Sep’20, which directed Multi-cap funds to keep at least 25% of their assets each in large-cap, mid-cap and small-cap stocks.

Some interesting facts

* Sep’20 saw notable change in sector and stock allocation of funds. On MoM basis, the weights of Technology, Healthcare, Auto, Oil & Gas, Chemicals and Cement increased, while that of Banks (Private and PSU), Utilities, Telecom, NBFCs, Capital Goods, Consumer and Metals moderated.

* Technology’s weight increased 140bp MoM to 11.6% to climb a new high.

* Healthcare’s weight hit 55-month high to 8.7% (+70bp MoM, +340bp YoY).

* Private Bank’s weight hit 29-month low to 15.8% (-150bp MoM, - 500bp YoY).

* In terms of MoM value increase, 5 of the top-10 stocks were from Technology: Infosys (+INR40.3b), TCS (+INR32.9b), HCL Tech (+INR23.2b), Tech Mahindra (+INR10.8b) and Wipro (+INR9b).

* Stocks exhibiting maximum decrease in value MoM were ICICI Bank (- INR70.8b), Axis Bank (-INR46.7b), SBI (-INR41.7b), Bharti Airtel (- INR38.9b) and Kotak Mahindra Bank (-INR34.3b).

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