Equity Mutual Funds AUM up for 7th consecutive year; net inflows consolidate in CY20 highlights Motilal Oswal

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Equity Mutual Funds AUM: Nifty scored a hat-trick ending 7.8% higher MoM in Dec ’20. The Nifty ended CY20 with 15% YoY gains a solid performance in a year ravaged by the COVID-19 pandemic. The index witnessed a spectacular rally in Q2 CY20 (up 24% QoQ) on the back of strong FII inflows and good corporate earnings. While FIIs inflows were at record highs, outflows by DIIs saw fresh highs too.

However, investors capitalized on the market rally to book profit and rebalance the portfolio as markets continue to achieve new highs, leading to moderation in domestic mutual fund (MF) net inflows.

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Equity AUM of domestic MFs reached new highs of INR9.5t (+17% YoY) in CY20, led by a rise in market indices (Nifty +15% YoY) and marginal increase in equity scheme sales (+2% YoY to Rs 2328 bn).
Further, redemptions increased 49% YoY to Rs 2264 bn, leading to decline in net inflows to Rs 64 bn in CY20 from Rs 768 bn in CY19. Another month, another trillion AUM – The MF industry AUM scaled new highs to reach Rs 31 tn in Dec’20 (+3.4% MoM and 16.9% YoY), primarily led by inflow of equities, income, and other ETF categories.  

Some interesting facts:

The year saw a notable change in the sector and stock allocation of funds. Defensive weight increased by 650 bps to 33.9%, led by an increase in the weights of Technology, Healthcare, and Telecom.
Domestic Cyclicals’ weight decreased 540 bps to 56.6%, led by BFSI, Capital Goods, Media, and Infra. Global Cyclicals’ weight, too, decreased 110bp to 9.5%. Technology saw a massive rise in weight in CY20 to 11.7% (+370bp YoY). The sector is now in the second position in terms of sector allocation of mutual funds – it was in the fifth position 12 months ago. Healthcare also gained in position to 4th place from 8th a year ago. Telecom is now in the 12th position v/s 15th a year ago.

In terms of value increase MoM, 6 of the Top-10 stocks were from Technology and Financials – Infosys (Rs 81.3 bn), ICICI Bank (Rs 68.4 bn), HDFC (Rs 35.7 bn), HCL Tech (Rs 25.4 bn), SBI (Rs 23.1 bn), and TCS (Rs 20.6 bn).