Equity AUM surges 8.7%: Here is what mutual funds are buying and selling

In June, MFs showed interests in Technology, Telecom, Private Banks, Autos, Consumer Durables, Chemicals, and Insurance, leading to a MoM rise in their weights

Assets Under Management (AUM) for equity funds (including Equity Linked Saving Schemes (ELSS) and index funds) increased by 8.7 per cent month-on-month (MoM) to Rs 30.2 trillion, said Motilal Oswal in a note.

This growth is likely due to:

• Rise in market indices: The Nifty index, a key benchmark for Indian stock markets, went up by 6.6 per cent MoM.
• Increased sales of equity schemes: Equity scheme sales jumped by 15% MoM to Rs 905 billion, This could be because mutual fund houses launched more New Fund Offers (NFOs) compared to the previous month.

Redemptions from equity funds also increased by 13.4 per cent MoM to Rs 449 billion (INR 449b). This means some investors withdrew their money from equity schemes.

Despite the rise in redemptions, net inflows (new money entering the industry) for equity funds increased  16.6% to Rs 456 billion (INR 456b) in June 2024 compared to Rs 392 billion in May 2024, which indicates a positive trend for equity investments.

The total AUM for the entire MF industry rose by 3.8% MoM to Rs 61.2 trillion in June 2024. This growth was driven by increases in AUM for:

• Equity funds 
• Other ETFs (Exchange Traded Funds) - AUM increased by Rs 473 billion  MoM.
• Balanced funds - AUM increased by Rs 280 billion 

After a period of consolidation in May 2024, the Nifty index reached a new all-time high of 24,174 points in June 2024. However, it ended the month slightly lower at 24,011 points, reflecting some volatility. Despite this, it still managed a significant gain of 6.6% compared to the previous month (MoM).

Volatility and Foreign Investment: The market experienced significant swings in June, with the Nifty fluctuating by a total of 2,893 points before settling 1,480 points higher than May's closing. Notably, Foreign Institutional Investors (FIIs) returned as net buyers in June, investing a net sum of $3.1 billion after remaining net sellers for the previous two months. 

Increased sales of equity schemes: Equity scheme sales jumped by 15% MoM to Rs 905 billion Rise in redemptions: However, it's important to note that redemptions from equity funds also rose by 13.4%.

In June, MFs decided to invest more in some sectors and companies, while reducing investments in others. 

• Technology: This sector, which includes tech companies, dipped a bit in May but bounced back in June. It's now the third most invested-in sector by MFs.
• Telecom: MFs put more money into telecom companies in June than they had in 46 months!
• Private Banks, Automobiles, Consumer Durables, Chemicals, and Insurance: These sectors also saw increased investment from MFs.

 In June 2024, MFs showed interests in Technology, Telecom, Private Banks, Autos, Consumer Durables, Chemicals, and Insurance, leading to a MoM rise in their weights. Conversely, Capital Goods, PSU Banks, Utilities, Metals, Healthcare, Consumer, and Real Estate saw a MoM moderation in weights.

Private Banks (17.2%) was the top sector holding for MFs in Jun’24, followed by Automobiles (8.9%), Technology (8.3%), Capital Goods (8.1%), and Healthcare (6.9%).  Technology, Telecom, Consumer Durables, Insurance, and Chemicals sectors witnessed the maximum increase in value MoM.

Sectors getting more money?

Capital Goods: After a big investment push in May, MFs slowed down on this sector in June.

PSU Banks, Utilities, Metals, Healthcare, Consumer Staples, and Real Estate: These sectors saw a decrease in new investments from MFs compared to May.

Top Gaining Companies:

Four out of the top 10 companies that increased in value (worth) in June were private banks. These include HDFC Bank, ICICI Bank, Axis Bank, and Kotak Mahindra Bank.

Basically:

The combined value of stocks held by the top 20 Asset Management Companies (AMCs, which are basically different mutual fund companies) grew by 8% in June compared to May (MoM). This is faster than the overall market growth, as measured by the Nifty 50 index, which went up by 6.6% MoM in June.

The top 20 AMCs also grew much faster than the market. Their value increased by 56.4% over the past year, while the Nifty 50 grew by 25.1%.

Top Performers Among the Top:

• SBI Mutual Fund (grew 8.9% MoM in June)
• Axis Mutual Fund (grew 8.8% MoM in June)
• DSP Mutual Fund (grew 8.6% MoM in June)
• Nippon India Mutual Fund (grew 8.2% MoM in June)
• HDFC Mutual Fund (grew 8.2% MoM in June)

The highest MoM net buying in June 2024 was observed in Dr Reddy’s (+10.3%), Bajaj Finserv (+9.9%), HDFC Life Ins. (+9%), Eicher Motors (+8.8%), Adani Ent. (+8%).

In June 2024, the stocks that saw the maximum MoM increase in value were HDFC Bank, Reliance Industries, Infosys, ICICI Bank, Indus Towers, Axis Bank, M&M, TCS, Kotak Mahindra Bank, and Mphasis.

Stocks that witnessed the maximum MoM decline in value were PFC, L&T, Hindalco Industries, Zee Entertainment, Coal India, HPCL, REC, PNB, SAIL, and Adani Power.