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Key observations

The Nifty’s two-month winning streak ended in Sep’22. With extreme volatility, the index oscillated within a range of ~1,350 points before closing 665 points, or 3.7% MoM, lower at 17,094. This elevated volatility was triggered by global and macro headwinds. FIIs reported outflows of USD1.6b in Sep’22 after recording the highest inflows in Aug’22 (since Dec’20). DIIs turned buyers of USD1.7b in Sep’22 after recording outflows in Aug’22.

Markets turned volatile amid the fear of monetary policy tightening. However, defying all odds, investors continued to invest in MFs. Inflows and contributions in systematic investment plans (SIPs) reached new highs of INR129.8b in Sep’22 (up 2.2% MoM and 25.4% YoY).

Total AUM for the MF industry declined 2.3% MoM to INR38.4t in Sep’22, led by a MoM reduction in AUM for liquid / equity / balanced funds by INR699b/INR140b/INR49b, respectively. Conversely, AUM for income fund increased INR68b.

Equity AUM for domestic MFs (including ELSS and index funds) decreased marginally by 0.9% MoM to INR15.8t in Sep’22. This was due to higher NFOs launched by mutual fund houses compared with the previous month, which led to an increase in equity scheme sales (up 17% MoM to INR440b). Further, market indices closed lower (the Nifty was down 3.7% MoM). At the same time, redemptions increased 15.6% MoM to INR276b. Consequently, net inflows increased 19.4% to INR164b in Sep’22, from INR137b in Aug’22.

Some interesting facts

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

* Consumers’ weight rose to an 18-month high of 7.1% (+30bp MoM, +40bp YoY) in Sep’22.

* Healthcare’s weight after declining at a 30-month low in Aug’22 climbed to 6.6% in Sep’22 (+30bp MoM and -60bp YoY).

* Oil & Gas’ weight slipped to a six-year low of 6% (-50bp MoM; -80bp YoY).

* Technology’s weight continued to moderate and was at a 25- month low of 9.8% (-20bp MoM; -210bp YoY).

* In terms of value decline MoM, seven of the top-10 stocks were from the global cyclical and private financial space: Reliance Industries (-INR91.7b), ICICI Bank (-INR51b), HDFC Bank (-INR48.2b), Tata Motors (-INR20.9b), HDFC (-INR20.7b), Tata Steel (-INR19b), and Coal India (-INR13.7b).

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