Inflows into equity mutual fund (MF) schemes declined in October, but sectors such as automobiles and banks remained attractive for fund managers. Newly listed stocks such as Nykaa and Fino Payments also received mutual fund money during the month.
In October, the exposure of MFs to private banks hit a five-month high of 17.7%, rising 90 basis points (bps) from the previous month and 10 bps from the same period last year, according to data sourced from the Association of Mutual Funds in India (Amfi) and NAV India analysed by Motilal Oswal Financial Services Ltd. Private banks’ sector exposure was at a 29-month low of 16.8% in September.
Similarly, the weightage of public sector banks (PSBs) jumped to a 20-month high of 3.5%, gaining 30 bps from the previous month and 150 bps from the corresponding period of the previous year. During the month, Nifty Bank had risen 4.52% while Nifty Private Bank was up 4% and Nifty PSU Bank 14%.
Most private banks showed a steady recovery in loan growth in Q2FY22, led by the retail, small and medium enterprises, and business banking portfolios, while the growth in the corporate portfolio was largely muted as revival in the private capital expenditure cycle will take some more time, said Motilal Oswal Financial Services.
Other sectors that received mutual fund money in October were capital goods and cement. Inflows into sectors such as healthcare, consumer, utilities, oil and gas, technology, chemicals, infrastructure, and consumer durables moderated, the analysis showed.
During October, healthcare’s weightage among MFs moderated for the third consecutive month to a 20-month low of 6.9%, dropping 30 bps compared to September and 150 bps in October last year. Nifty Healthcare index had slipped 4% during the month.
Inflows into equity MF schemes continued to decline for the third consecutive month, though monthly contributions through systematic investment plans (SIPs) have increased, showed Amfi data. Equity MFs received ₹5,079.16 crore in October, a 21% fall from September, when it registered the lowest net inflow in the past three months. Monthly SIP contributions were ₹10,518.53 crore in October, compared to ₹10,351.33 crore in the previous month.
With limited initial public offerings (IPOs) in October, MF deployment in issuances were only ₹881 crore. Out of the total, Nykaa’s parent FSN E-Commerce Ventures Ltd received ₹678 crore and Fino Payments got ₹203 crore, said Abhilash Pagaria, an analyst at Edelweiss Alternative Research.
“Mutual funds used the recent run-up in names such as IRCTC, Tata Power Co, Mindtree, and SRF as an opportunity to trim stake. These names were in phenomenal momentum because of potential MSCI entry. Now with the announcement out, adjustment will take place on 30 November, when passive MSCI Standard Index trackers will add them,” Pagaria said.
IRCTC has been on a bull run since the beginning of this year. In October, its stock jumped 11%, surging 194% in 2021 so far.
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