MF Top Buys/Sell: June 2020

From the Desk of DreamLadder: July 14, 2020

AUM of MF industry grew 4.1% MoM to Rs.25.3 lakh crores in June 2020 while on QoQ basis it saw increase of 14.5%. Net inflow during June 2020 was subdued at Rs.7,266 crores as compared to Rs.70,813 crores in May 2020 on back of huge outflow in liquid funds, muted inflows in equity & hybrid segments.

Liquid funds registered a huge outflow of Rs 44,226 crore in the month of June 2020 on the back of advance tax outflows. Net inflow into equity mutual funds during the same period slumped 95% to Rs.241 crores as investors pulled out from Large-cap, Multi-cap and Value/Contra funds due to profit-booking.

This is the third consecutive monthly decline in inflows into equity mutual funds. This could be slightly surprising as it is happening at a time when the market has witnessed V-shaped recovery post March mayhem along with the increase in retail investors.

Source: AMFI

A closer look at the data suggests that the underlying trend has not deteriorated for the MF industry. Overall inflows in equity MF in the month of June were higher as compared to that in May but there was a significant increase in redemptions that led to weak net inflows.

SIP book also declined for the third consecutive month to Rs.7,917 crores in June 2020, dropping below Rs.8,000 crores for the first time since March 2019.

Out of the total MF AUM, equity oriented AUM stands at Rs.7.29 lakh crores, ~28.1% of total Industry AUM. In terms of percentage, this has seen improvement, almost 2% MoM while it has witnessed ~5% increase from the recent bottom seen during March 2020 (3M moving average till Feb 20 was ~31%)

Source: AMFI, ICRA Analytics

Buy/Sell by AMCs:

The objective of writing this report is to apprise you about the industry trends and track what smart institutional investors are buying and selling in their actively managed portfolios.

Key highlights:

a) During Q1FY21, the largest depletion in MF AUMs was seen by Birla MF and Templeton MF due to their large exposures to the vulnerable debt.

b) Fund Managers reduced weightage in Pharma sector by 50bps to 7.8% during the month of June 20 while Energy segment saw jump of 60bps to 9.4% but largely on account of rally in Reliance stock.

c) In Financials, NBFC and Private banks saw increase in weightage by 50bps & 40bps, respectively while PSU bank saw only muted growth of 10bps in weightage during the same period.

d) The weightage of Reliance Industries in the portfolio increased for several big names like SBI MF, ICICI MF, Axis MF, UTI MF, Aditya Birla MF and Kotak MF. It was largely driven by rally in the stock price. However, AMCs like ICICI, Axis & IDFC substantially bought this stock during June 2020.

e) FMs bought Financials like Kotak Mahindra Bank, Bajaj twins, Axis bank, SBI Life and IndusInd Bank during June 2020.

f) Mixed trends seen in the PSU stocks. Aditya Birla, SBI and Invesco sold in NTPC while ICICI MF and Nippon India were buyers. Fund houses like ICICI MF, Kotak MF & SBI MF reduced stake in Power Grid while HDFC MF and Nippon India increased their stake in this stock.

g) In telecom sector, Vodafone Idea was bought by Kotak MF, DSP MF, HDFC MF and Edelweiss MF while AMCs like SBI MF exited completely and Franklin (down ~40%) and ICICI MF reduced their stake. On Bharti Airtel, Funds like SBI MF, ICICI MF, HDFC MF and Mirae assets increased the stake while Kotak MF and L&T reduced the stake.

h) In healthcare segment, HDFC MF and Nippon India sold Aurobindo pharma while SBI MF, ICICI MF, Aditya Birla and Edelweiss bought this stock. In the case of Sun Pharma, several fund houses like ICICI MF, Kotak MF, DSP MF and Axis MF have reduced their exposure while Nippon India and Mirae Assets have increased their exposure.

i) New names added by these Fund Houses in their portfolio: 1) SBI MF: Andhra Paper, Ratnamani Metals and Supreme Industries; 2) HDFC MF: Wheels India, MCX, Can Fin Homes and Vodafone Idea; 3) Aditya Birla MF: Aarti industries, JSW Energy, Hexaware, Sunteck Realty and NALCO; 4) Axis MF: GSPL, Crompton Greaves; 5) Kotak MF: Vodafone Idea, Escorts, Tata Power, Piramal Enterprises, 3M and L&T Finance.

j) Stocks from which these Fund Houses exited completely: 1) SBI MF: Indostar Capital, AU Small Finance Bank and Ipca lab; 2) HDFC MF: SH Kelkar, Adani Power and Havells India; 3) Aditya Birla MF: Adani Power; 4) Axis MF: PVR, Varroc Engineering and Adani Power; 5) Kotak MF: Glenmark pharma & Adani Power.

Top Buy/Sell for leading Mutual Fund Houses:

Disclaimer: The views expressed here are based solely on information available publicly/internal data/other reliable sources believed to be true. Facts presented have been verified, however, the same may contain human errors/ errors from database. The information is provided merely as a complementary service and do not constitute an offer, solicitation for the purchase or sale of any financial instruments, inducement, promise, guarantee, warranty, or as an official confirmation of any transactions or contract of any kind.