Mutual Fund Tracker: December 2020

Net flows still low; Higher buying in IT

Equity MF segment continued to witness net outflow for the sixth straight month in December(Rs. 10,147 Cr.), as investors preferred to continue booking profit in view of rising fear of market correction post sharp V-shaped recovery since we touched the lows in March 2020. Although the net decline for equity MF segment has been marginally lower vis-à-vis previous month. Signs of the economy recovering,  the 32.4 million vaccine distributed worldwide and the optimism for the coming future has kept market in the bullish trend, which in turn, has continued making the investor book to profits, leading to such a big consecutive outflows.

All of the equity mutual fund categories witnessed redemption during the month of December 2020 for the second time as well.

Monthly Net Inflow (+ve) / Outflow (-ve) (Rs. Crores)

Multi Cap category saw an outflow of Rs.3,541 cr as against Rs.399 cr of average outflows during previous 12 months. Similarly, Large Cap saw an outflow of Rs.3,876 cr as against Rs. 196 cr of average outflows during the last 12 months. 

On the other hand, Debt mutual fund schemes saw inflows of Rs. 13,863 crores compared to an average inflow of Rs. 16.770 crores in the previous 12 months. As a result, total AUM rose to Rs.31.0 lakh crores at the end of December 2020 vs. Rs.30.1 lakh crores at the end of the previous month.

However, good news have come on the SIP front which came back at the old levels – Rs.8,418 cr for December 2020 as against Rs.7,302 cr for November 2020 after consistently falling from the recent peak of Rs.8,641 cr seen during the month of March 2020. As per some media reports, most of these SIP flows have come tied to the NFOs and the next few months will give the confirmation whether this trend has changed for the better.

Sectoral Overweight/Underweight positioning of top MF

IT sector saw higher buying (weight at 11.4%, up 71bps mom, however still 410bps lower than NSE 200 banking weight). Followed by Consumer Discretionary (at 6.3%, up 31bps mom), and Industrials (at 4.9%, up 22bps mom).

MFs reduced holdings: Financial Services (at 30.7%, -45bps mom), Oil & Gas (at 7.2%, -22bps) and Building Materials (at 3.8%, -21bps).

 IT and Financial sectors remain the most bought sectors on 5 month basis.

Top MF activity:

Top Buys:

Large Cap: Axis Bank, PNB, NMDC

Mid Cap: Vodafone Idea, GMR Infrastructure, Canara Bank

Small Cap: Burger King, National Aluminium Co., JM Financial  

Top Sells:

Large Cap: NTPC, ICICI Bank, SBI

Mid Cap: Tata Power Co., Bank of Baroda, NHPC

Small Cap: Vedanta Ltd., IDFC Ltd., Spicejet Ltd.

Cash holding of Equity MFs is down since May 2020:

Overall cash holding of equity oriented MF schemes is down by 140 bps from 4.0% in July 2020 to 2.6% in December 2020. Sectoral/Thematic and Dividend Yield category saw a significant increase in the cash levels indicating some of the sectors may be overvalued. The cash levels remained constant MoM in the Large, Large & Mid, Mid , Multi, and Small Cap funds. Overall the Cash equivalent% of the MF’s AUM declined by 10 bps.

Cash holdings growth MoM was lower for categories like Value Funds and Focused Funds.  

Exhibit 1: Scheme wise cash holding (December 2020)

Exhibit 2: MF wise top buys/sells in December 2020

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.