MF trends: Net equity inflows hit all-time high in Oct 24; up 75% this year

 The Indian mutual fund (MF) industry has defied market volatility, with October 2024 witnessing record-breaking equity inflows despite a significant slump in major stock indices. Domestic equity funds saw a sharp 3.6% month-on-month (MoM) decline in their assets under management (AUM), dropping to Rs 32.6 trillion, primarily due to a 6.2% dip in the Nifty index. However, the month also saw  net inflows into equity schemes jump to an all-time high of Rs 498 billion, an increase of 37% over September 2024's Rs 364 billion, shows data analysed by Motilal Oswal.

 

 Systematic Investment Plan (SIP) inflows also reached a historic high of Rs 253.2 billion, a 49.6% year-on-year (YoY) growth.

 

 

Key Highlights:

 

Record Net Inflows: October 2024 saw Rs 498 billion in net equity inflows, a 75% increase in year-to-date (YTD) 2024, despite an overall downturn in market indices.

 

Equity AUM Falls: The equity AUM of domestic mutual funds dropped by 3.6% MoM to INR 32.6 trillion, driven by a decline in the broader market, particularly the Nifty, which fell 6.2% MoM. Notably, equity schemes still saw a 3.5% MoM increase in sales, totaling INR 868 billion.

 

Steady SIP Inflows: Investors continued to demonstrate commitment to long-term wealth creation, with SIP inflows reaching a new peak of INR 253.2 billion—up 3.3% MoM and 49.6% YoY.

 

Slower Redemptions: Redemptions slowed to Rs 370 billion (down 22.1% MoM), suggesting a calmer investor sentiment amid the market downturn.

 

Sector Rotation: October saw notable shifts in sectoral allocations within equity funds. The weightage of sectors like Private & PSU Banks, Capital Goods, Healthcare, Technology, and Cement saw a rise, while sectors such as Oil & Gas, Consumer Durables, Automobiles, NBFCs, and Retail saw a reduction in fund exposure.

 

Banks and Technology Dominate Investor Focus

In terms of sectoral performance, Private Banks emerged as the clear leader in fund allocations, increasing to 16.8%, marking a 70 basis points (bp) MoM rise. Notably, ICICI Bank, SBI, and HDFC Bank saw significant appreciation in their market value, collectively adding over Rs 183 billion in value. This surge is in line with increasing interest from MFs in financial services, with Private Banks now comprising the largest share of MF portfolios.

 

The Technology sector, with a 8.9% share, also saw a steady rise in fund allocations, while Capital Goods (7.9%) experienced a significant uptick after four months of decline. On the flip side, the Oil & Gas sector saw a seventh consecutive month of underperformance, dipping to a 11-month low of 5.9%..

 

AUM Breakdown and Sector Rotation

October's fund flows saw a shift in sector and stock allocation. Funds increased exposure to sectors such as Private Banks (up 70bp MoM), Capital Goods (+40bp MoM), and Healthcare. On the other hand, sectors like Consumer Durables, Oil & Gas, and Automobiles saw reduced allocations, reflecting a market sentiment of cautious optimism amid global uncertainties.

 

Among individual stocks, the Banking sector was the biggest beneficiary, with ICICI Bank, SBI, and HDFC Bank seeing strong monthly gains. Conversely, Reliance Industries and Infosys were among the stocks that witnessed the sharpest declines in value during the month.

 

Key Takeaways:

• Net equity inflows hit an all-time high of Rs 498 billion in October 2024.
• SIP inflows reached a record Rs 253.2 billion, demonstrating investor commitment to long-term wealth creation.
• The banking sector dominated equity allocations, with Private Banks showing continued strength.
• While equity AUM saw a decline due to market fluctuations, total AUM of the MF industry inched up, indicating resilience in investor sentiment.

 

In October 2024, the stocks that saw the maximum MoM increase in value were ICICI Bank, SBI, HDFC Bank, Coforge, BSE, L&T, Eicher Motors, Indian Bank, Divi’s Labs, and One 97 Communications.

 

Stocks that witnessed the maximum MoM decline in value were Infosys, Reliance Industries, Maruti Suzuki, Tata Motors, NTPC, Cholamandalam Investment & Finance, Interglobe Aviation, Bharti Airtel, IndusInd Bank, and ITC.