Mutual Fund Tracker: October 2020
Monthly net outflow in Equity MFs continues for the 4th consecutive month; figures worsen from previous month
Equity MF saw a net outflow in the month of October (Rs. 2725 cr), for the fourth consecutive month, as investors preferred to continue booking profit. The sharp V-shaped recovery during last few months and change in the definition of multi-cap funds by SEBI are likely reason for outflow from the equity mutual funds.
Most of the equity mutual fund categories witnessed redemption during the month of October 2020, except three categories – Focused and Large & Mid Cap. Also, we can derive some concerns from the quantum of decline which was higher as against the outflow trends seen during previous month.
Monthly Net Inflow (+ve) / Outflow (-ve) (Rs. Crores)
Multi Cap category saw an outflow of Rs.1,903 cr as against Rs.191 cr of average inflows during previous 12 months. Similarly, Large Cap saw an outflow of Rs.551 cr as against Rs. 595 cr of average inflows during the last 12 months.
Debt mutual fund schemes also saw significant inflows to Rs. 1.1 lakh crores compared to an outflow of Rs. 0.52 lakh crores in the previous month. As a result, total AUM rose to Rs.28.2 lakh crores at the end of October 2020 vs. Rs.26.9 lakh crores at the end of the previous month.
Sectoral Overweight/Underweight positioning of top MF
MFs increased its exposure to IT Services – 11.3% in September, an increase of 150 bps during last one month and also highest levels since March 2020. Other segment which saw buying was Pharma & Healthcare – 70 bps increase during September and Oil & Gas – 50 bps increase in the month of September.
Highest selling was seen in Financials sector where decline was 190 bps during September 2020. Telecom & Media sector also saw decline in weights – 3.3% in September 2020 from 3.6% in August 2020, a decline of 30 bps. Other sectors which saw decline in the weights are Utilities and Industrials.
Top MF activity:
Top Buys:
Large Cap: SBI, Bharti Airtel, Sun Pharma
Mid Cap: Vodafone Idea Ltd., Federal Bank, NHPC
Small Cap: UTI AMC, National Aluminium, Angel Broking
Top Sells:
Large Cap: ITC, Indian Oil, GAIL
Mid Cap: PNB, Bank of Baroda. Bharat Heavy Electricals
Small Cap: Vedanta, Sanghi Industries, Tata Chemicals
Cash holding of Equity MFs is down since May 2020 despite some uptick from previous month:
Overall cash holding of equity oriented MF schemes is down significantly by 240 bps from 5.1% in May 2020 to 2.7% in October 2020, further 30 bps downside movement from the previous month (September 2020: 3.0%) largely on back of reduction in cash levels in Large Cap, Mid Cap Small Cap, Focused.
Cash holdings growth MoM was higher for categories like Sectoral/Thematic while it was moderate for the categories like Large & Mid Cap. On the other hand it continued to decline even MoM for sub-categories like Mid Cap and Small Cap.
Exhibit 1: Scheme wise cash holding (October 2020)
Exhibit 2: MF wise top buys/sells in October 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.
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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.