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FUND FOLIO (December 2021): Equity inflows at four-month highs, backed by lower redemptions

Key observations

* The Nifty ended its six-month winning streak in Nov'21, ~4%, or 688 points, lower at 16,983. Nov'21 was characterized by elevated volatility, with the benchmark oscillating in a wide range (~1,400 points) and pulling back ~8% from record highs of Oct'21. Much of the market anxiety was attributable to global factors (the Fed's taper announcement, rising bond yields, higher crude oil prices, and the strengthening of the US Dollar Index). A big fundraise in the primary market also put some pressure on the secondary market.

* However, investors continue to invest in MFs, with inflows and contributions in systematic investment plans (SIPs) reaching fresh highs of INR110.1b in Nov'21 (up 4.6% MoM and 50.7% YoY).

* Equity AUM (including ELSS and index funds) of domestic MFs decreased 1.4% MoM to INR13.3t in Nov'21. This was on account of decline in market indices (the Nifty was down 3.9% MoM). Equity scheme sales remained stable at INR332b in November. However, meaningful decline was seen in redemptions to INR190b (-22.6% MoM). Consequently, net inflows increased 65.3% to INR142b in November, from INR86b in October.

* The total MF industry AUM remained unchanged MoM at INR37.3t in Nov'21, led by a MoM increase in the AUM of liquid/balanced funds (INR544b/INR18b). The AUM for income/equity/other ETF funds declined INR331b/INR182b/INR56b MoM.

Some interesting facts

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

* Technology weight reached new highs of 12.4% (+70bp MoM and +190bp YoY).

* Capital Goods weight stood at a 22-month high of 5.7% (+20bp MoM and +130bp YoY).

* Private Banks moderated to 16.9% in Nov'21 (-80bp MoM and -200bp YoY).

* Metals moderated for the fourth consecutive month to reach a 10-month low of 2.4% (-30bp MoM and +20bp YoY).

* The following stocks exhibited the maximum increase in value MoM: Reliance Industries (+INR54.2b), Infosys (+INR33.2b), Bharti Airtel (+INR22.1b), TCS (+INR13.5b), and Power Grid Corp (+INR12.8b).

* In terms of value decrease MoM, 6 of the top 10 stocks were from BFSI: ICICI Bank (-INR100b), SBI (-INR46.7b), HDFC Bank (-INR39.1b), HDFC (-INR32.1b), Axis Bank (-INR20b), and Bajaj Finance (-INR12.9b).

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