Mutual Fund Tracker: August 2020
Monthly net outflow in Equity MFs continues for the 2nd consecutive month
Equity MF saw the monthly net outflow in the month of August (Rs.4,000 cr), for the second consecutive time during last 4 years, as investors preferred to book profit in view of declining household cash-flows in prevailing uncertain economic environment, as well as rising fear of market correction post recent V-shaped recovery.
Most of the equity mutual fund categories witnessed redemption during the month of August 2020, which marked the 5th sequential decline in inflows in equity mutual fund category. except sectoral/thematic category. Debt mutual fund schemes also felt the redemption pressure during August after a strong inflow in the previous month. Nonetheless, total AUM rose to Rs.27.5 lakh crores at the end of August 2020 vs. Rs.27.1 lakh crores at the end of previous month.
Monthly Net Inflow (+ve) / Outflow (-ve) (Rs. Crores)
Equity outflow during August 2020 was due to redemption pressure across all major equity segments except Sectoral, Focused Fund & ELSS categories. Multi Cap category saw an outflow of Rs.1,157 cr as against Rs.922 cr of average inflows during previous 12 months. Similarly, Large Cap saw an outflow of Rs.1,553 cr as against Rs.1,262 cr of average inflows during the last 12 months.
Sectoral Overweight/Underweight positioning of Top MFs
MFs increased its exposure to Financials – 28.9% in August, an increase of 110bps during last one month and also highest levels since March 2020. Other segment which saw buying during August was Auto & Ancillaries – 20bps increase during August while its exposure has gone up to 6.5%, an increase of 50bps from March 2020.
Highest selling was seen in Oil & Gas sector where decline was 60bps during August 2020. IT sector also saw decline in weights – 9.8% in August 2020 from 10.2% in July 2020, a decline of 40bps. However, it has seen an increase of 2% since March 2020. Other sectors which saw decline in the weights are Telecom & Healthcare which saw decline of 30bps each in their weights.
Top MF activity:
Top Buys:
Large Cap: Bandhan Bank, Eicher Motors, DLF
Mid Cap: M&MFSL, Hindustan Aeronautics, Zee Entertainment
Small Cap: First Source Solutions, PTC India Financial Services, Tata Steel
Top Sells:
Large Cap: Vedanta, IOC, PNB
Mid Cap: Vodafone Idea, SAIL, Federal Bank
Small Cap: NHPC, NLC India, Karur Vysya Bank
Cash level indicating Equity oriented MF schemes are heavily invested:
Overall cash level of equity oriented MF schemes is down significantly by 130bps from 4.0% in July 2020 to 2.7% in August 2020 largely on back of reduction in cash levels in Multi Cap, Large Cap, Value and ELSS schemes. There was no increment in cash levels among any of the categories.
We saw a substantial decrease in cash levels among all the funds of Axis MF. We can look into some of its flagship schemes like Axis Multi Cap ( from 8% to 4%), Axis Mid Cap (14% to 10%) and Axis Small Cap (13% to 5%) vis-a-vis its peers in these categories. But it is also to be noted that that Axis MF still stands as one of the funds which highest cash levels.
In Value/Contra funds category, ICICI Pru discovery Fund is sitting on higher cash at 10%. In Focused Fund category, ICICI Pru Focused Fund and Nippon India Focused Fund have cash holding of 11% and 9%, respectively.
Exhibit 1: Scheme wise cash holding (August 2020)
Exhibit 2: MF wise top buys/sells in August 2020
Mutual Fund Tracker: December 2020
Mutual Fund Tracker: November 2020
Inter-Scheme Transfers by MFs: Are you a Sitting Duck?
About The Author
Saday Sinha
Mr. Saday Sinha is Founder & CEO of DreamLadder Capital, a boutique wealth advisory firm. He is a seasoned investment professional with over 15 years of experience in the Indian Equity market. He has spent a decade tracking the banking and NBFC sector as part of the Equity Research team at Kotak Securities. He also worked with IDFC as an Analyst with the India Equity Strategy team. He holds a Master's degree in Economics from Delhi School of Economics and is an alumnus of Jamnalal Bajaj Institute of Management Studies, (Mumbai), with specialization in Finance. He writes for various magazines & Newspapers and his valuable opinion has also been sought by news channels like CNBC, ET Now or Bloomberg, in the past. He also speaks at seminars & conferences and lectures at Management institutes.