Thematic, flexicap assets shrink over rise in volatility, shows data

The sharp correction in the markets over the past week has made a dent into the assets under management (AUM) of thematic and flexicap equity schemes.

The flexicap fund category has seen a Rs 11,266 crore drop in AUM to Rs 2.04 trillion in October, shows the data from AMFI. The thematic/sectoral category has seen its AUM decrease by Rs 16,675 crore to Rs 1.20 trillion.

Given the spike in volatility, industry players say, investors are moving their funds from small cap and thematic funds to relatively safer large cap funds.

The benchmark indices gained 0.3 per cent in October, while the smallcap indices ended a per cent lower. However, from their recent peak, the broader market mid- and small-cap indices are down between 7-9 per cent.

“In the last few months with the surge in stock prices, valuations had turned expensive in the midcap and smallcap space. Investors might have thought to move money towards largecaps, which are less volatile than midcap and smallcaps,” said Jimmy Patel, MD and CEO at Quantum AMC.

Meanwhile, large cap funds saw an increase in its AUM by Rs 4,065 crore to Rs 2.22 trillion in October. Senior officials in the industry say that investors have continued to invest through systematic investment plans (SIPs) even as markets have turned volatile.

Strong SIP flows helped equity-oriented schemes log net inflows for the last few months. In September, net equity inflows stood at Rs 8,677 crore, while SIP inflows were more than Rs 10,000 crore.

MFs have even continued to remain net buyers in the cash market. In October, they bought shares worth nearly Rs 2,621 crore till 25 October, shows the data from Securities and Exchange Board of India (Sebi).

“While we remain constructive on midcap and small cap funds, multicap and flexicap funds are better placed for most investors in the current environment where midcap and small cap funds have already outperformed significantly,” said ICICI Direct in its research report.