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Teji Mandi Explains: Equity mutual funds scripts a comeback as market stays in momentum

08:03 PM Jun 15, 2021 | Teji Mandi

The MF industry’s total AUM increased 2.1% MoM to Rs 33.1 lakh crore in May 2021, primarily led by an MoM increase in AUM of equity funds, other ETF funds, and balanced funds.

Equity AUM of domestic MFs increased 7.7% MoM to Rs 11.1 lakh crore in May 2021. It is the third straight month of inflow in equity funds and the highest since February last year. Furthermore, redemptions decreased 18.6% MoM to Rs 17,200 crore. This led to an increase in net inflows to Rs 10,500 crore in May 2021 – the highest since Mar 2020.

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Equity mutual funds see Rs 10,000 cr-inflow in May; indicates investor confidence in economy

Return of Equity MFs

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The fact that the market remained resilient even during the second COVID-19 wave has reinstalled the investors’ confidence in the mutual funds. Moreover, chances of faster pick-up in economic activities and declining COVID-19 cases have acted as an added booster for the industry.

Lower interest rates on fixed income products and below-par performance of the debt fund schemes have left no other option for investors apart from investing in equity.

Sector-Wise Trends

The monthly trends also revealed that mutual funds show maximum interest in PSU banks, oil & gas, automobiles, capital goods, insurance, and private banks. They increased their MoM weight in these sectors during May 2021.

Healthcare, metals, consumer, technology, telecom, chemicals, consumer durables, and cement were the sectors where mutual funds declined their weight.

Private banks continue to remain the top holding sector among the mutual funds with 18% weight in May 2021. It was followed by technology (11%), healthcare (7.6%), and NBFCs (7.4%). Textiles, media, real estate, and infrastructure remained the least preferred sectors for the month.

Adani stocks characterised by similar set of FPIs, low mutual fund holdings

Stock-Specific Developments

The value of SBI, HDFC Bank, ICICI Bank, Reliance Industries, HDFC, L&T, SBI Life Insurance, Infosys, Axis Bank, and Maruti Suzuki increased the most MoM.

On the other hand, the stocks that saw the maximum decline in value MoM were JSPL, Cholamandalam Investment & Finance, Deepak Nitrite, Tata Chemicals, Britannia Industries, Tata Steel, Info Edge, Linde India, Navin Fluorine, and Tata Consumer.

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