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FUND FOLIO : Equity inflows at record highs; defying market volatility

Key observations

* Elevated market volatility, coupled with concerns around the sticky inflation print, impacted investor sentiment in July'21. Notwithstanding this, the Mutual Fund industry witnessed record inflows. In fact, SIP (systematic investment plan) flows reached new highs, coming in at INR 96.1b in July'21.

* Notably, the exodus of foreign funds (USD1.7b) was the highest since Mar'20. DII inflows, however, spiked to USD2.5b - the highest since Mar'20, contributed by domestic MFs with USD2.6b and DIIs (ex-MFs) with - USD0.1b.

* Equity AUM (incl. ELSS and index funds) of domestic MFs increased 5.2% MoM to INR12.1t in July'21. This was on account of new fund offers (NFOs) launched by mutual fund houses, which led to an increase in equity scheme sales (up 50.8% MoM to INR441b) and a rise in market indices (Nifty up 0.3% MoM). At the same time, redemptions decreased 3.1% MoM to INR222b. Consequently, net inflows reached record highs of INR219b in July'21, from INR63b in June'21.

* The MF industry's total AUM increased 4.9% MoM (INR1.6t) to INR35.3t in July'21, primarily led by a MoM increase in AUM of equity funds (INR603b), liquid funds (INR541b), and income funds (INR159b).

Some interesting facts

* The month saw notable changes in the sector and stock allocation of funds. On a MoM basis, the weights of Metals, Cement, Real Estate, Chemicals, Telecom, Textiles, and Retail increased, while the weights of Oil & Gas, Private Banks, Automobiles, Utilities, Consumer, and Technology moderated.

* Metals' weight achieved a 33-month high after moderating in the last two months to 3.4% (+50bp MoM; +130bp YoY).

* Oil & Gas' weight hit a 48-month low to 6.4% (-50bp MoM; -340bp YoY).

* Private Banks' weight decreased for the second consecutive month to 16.8% (-30bp MoM; +40bp YoY).

* In terms of value increase MoM, 5 of the top 10 stocks were from BFSI and Metals: ICICI Bank (+INR86b), Tata Steel (+INR38.1b), SBI (+INR22.5b), Bajaj Finance (+INR19.7b), and Hindalco Industries (+INR17.1b)

* Stocks that exhibited maximum decline in value MoM: Reliance Industries (-INR25.5b), TCS (-INR20.2b), Kotak Mahindra Bank (-INR14.3b), Dr Reddy's Labs (-INR14.1b), and Maruti Suzuki (-INR12.7b).

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