Mutual Fund Tracker: July 2020

First monthly net outflow in Equity MFs in last 4 years

Equity MF saw the monthly net outflow in the month of July (Rs.2,480 cr), first 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. Nonetheless, total AUM rose to Rs.27.3 lakh crores at the end of July 2020 vs. Rs.25.5 lakh crores at the end of previous month, mainly driven by strong debt inflow (Rs.91,392 cr) in this month.

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

Equity outflow during July 2020 was due to redemption pressure across all major equity segments except Focused Fund & ELSS categories. Multi Cap category saw an outflow of Rs.1,033 cr as against Rs.1,025 cr of average inflows during previous 12 months. Similarly, Large Cap saw an outflow of Rs.365 cr as against Rs.1452 cr of average inflows during the last 12 months.

Sectoral Overweight/Underweight positioning of Top MFs

MFs continued to increase exposure in IT sector (10.2% in July 2020), an increase of 2.4% since March 2020, followed by Oil & Gas (9.2% in July 2020), where increase was of the tune of 1.9% during the same period. Similarly, healthcare sector saw increase in exposure (8.4% in July 2020), an increase of 40bps since March 2020. Nonetheless, Pharma sector exposure is still down from the peak of May 2020 when it touched ~9.4%, despite MoM increase during the month of July 2020 (50bps since June 2020).

On the other hand, MFs continued to pare their positions in Financials (down 1.8%), Consumer Discretionary (down 1.8%) and Industrials (down 1.3%) since the month of March 2020.

Top MF activity:

Top Buys:

Large Cap: ICICI Bank, Infosys, NMDC

Mid Cap: Yes Bank, Ashok Leyland, NHPC

Small Cap: NALCO, Equitas Holdings, KRBL

Top Sells:

Large Cap: Vedanta, IOC, PNB

Mid Cap: Vodafone Idea, SAIL, Federal Bank

Small Cap: TV18, Engineers India, NCC

Cash level is down for Equity oriented MF schemes:

Overall cash level of equity oriented MF schemes is down 50bps from 4.5% in June 2020 to 4.0% in July 2020 largely on back of reduction in cash levels in Small Cap, Multi Cap, Mid-cap and ELSS schemes while cash level rose for the segments like Focused and Value/Contra fund schemes.

On relative basis, Axis MF is sitting with higher cash in some of its flagship schemes like Axis Bluechip (9%), Axis Mid Cap (14%) and Axis Small Cap (13%) vis-a-vis its peers in these categories which makes it better placed if market corrects from current levels.

On Value/Contra funds category, ICICI Pru discovery Fund and Tata Equity P/E fund are sitting on higher cash – 12% and 9%, respectively. In Focused Fund category, ICICI Pru Focused Fund and Nippon India Focused Fund have cash holding of 9% and 8%, respectively.

Exhibit 1: Scheme wise cash holding (July 2020)

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