HDFC AMC, Nippon Life AMC decline as equity fund inflows tumble in June

Nippon Life Asset Management slipped 4 per cent to Rs 291, while HDFC AMC dropped 3 per cent to Rs 2,490 in the intra-day trade on the BSE.

Shares of asset management companies (AMCs) were trading weak for the second straight day on Thursday in an otherwise firm market as equity fund inflows fell sharply in June.

Nippon Life Asset Management slipped 4 per cent to Rs 291, while HDFC AMC dropped 3 per cent lower to Rs 2,490 in the intra-day trade on the BSE. On Wednesday, these stocks ended lower between 2 per cent and 3 per cent. In comparison, the S&P BSE Sensex was up 0.80 per cent at 36,618 points at 12:02 pm.

Nippon Life India AMC is the asset manager of Nippon India Mutual Fund, while HDFC AMC is the investment manager to the schemes of HDFC Mutual Fund.

Inflows into equity mutual funds in June declined sharply to a four-year low of Rs 241 crore compared to Rs 5,257 crore in May. This is the third consecutive monthly decline in inflow in equity mutual funds, data by the Association of Mutual Funds in India (Amfi) showed on Wednesday.

AMC’s almost 75 per cent of the total revenues are contributed by equity and the company maintained that equity will be the key focus area though they are cautiously optimistic regarding recovery in equity.

“Investors seem to be reducing their exposure to equity markets in the recent rally as retail sentiment remains weak. While SIP (Systematic Investment Plan) inflows also fell in June to Rs 7,927 crore from Rs 8,123 crore in the previous month, they remain largely stable,” ICICI Securities said in a note.

“A steep correction in equity markets has impacted both AUM and earnings momentum. The near-term outlook remains uncertain but structural changes, including an increase in financial savings, remain positive. It is expected to maintain its leadership through healthy AUM growth. Focus on strong operating efficiency and higher proportion of equity AUM is seen aiding profitability,” the brokerage firm said in March quarter results update. 

MTM decline led to schemes falling in a low-value slab, enabling higher total expense ratio (TER) cushioning declining revenue. HDFC AMC’s business franchise is seen remaining strong with a substantial market share of 14-15 per cent and strong operational performance (39-40 bps). Hence, its strong positioning and superior earnings profile deserve, it said.

Analysts at Centrum Broking maintain HDFC AMC’s assets under management (AUM) growth estimates for FY21 and FY22 while accounting for lower employee cost and rebound in equity markets in FY22 (thus positively impacting yields). This might result in higher profit after tax by 4.5 per cent/11.5 per cent for FY21/FY22E vs previous estimates, the brokerage firm said in Q4 results update.