Betting on private banks: What mutual funds bought and sold in Sept 2024

HDFC Bank, M&M, Axis Bank, Maruti Suzuki, ICICI Bank, and Samvardhana Motherson were among the top-performing stocks in terms of value increase.

The equity assets under management (AUM) of domestic mutual funds (MFs), including equity-linked savings schemes (ELSS) and index funds, rose  3.3 per cent month-on-month (MoM) to reach Rs 33.8 trillion in September 2024. This growth was primarily fueled by a 2.3% increase in market indices, particularly the Nifty, alongside a 3.7% rise in equity scheme sales, which totaled Rs 838 billion, according to data analysed by Motilal Oswal.

However, the mutual fund industry faced a notable uptick in redemptions, which surged by 20.6% month-on-month to Rs 474 billion. As a result, net inflows moderated, dropping by 12.3% to Rs 364 billion in September from Rs 415 billion in August.

The total AUM of the mutual fund industry also inched up by 0.6% MoM, reaching Rs 67.1 trillion. This increase was driven by growth in equity funds (up Rs 1,074 billion), balanced funds (up Rs 167 billion), and other exchange-traded funds (ETFs) (up Rs 159 billion). However, there was a significant decline in the AUM of liquid and income funds, which saw reductions of Rs 917 billion and INR 124 billion, respectively.

Investors continued to favor mutual funds, as systematic investment plan (SIP) inflows hit a record high of Rs 245.1 billion in September, reflecting a 4.1% increase month-on-month and a substantial 52.8% year-on-year growth. 

What did investors buy?

 The weights of Private Banks, Metals, Retail, Automobiles, Consumer goods, Utilities, and Consumer Durables experienced an uptick, while allocations to Technology, Oil & Gas, Capital Goods, Healthcare, and PSU Banks saw a decline.

Private banks rebound

Private Banks, which had reached a near six-year low in weight in August, rebounded to 16.1% in September, reflecting a 20 basis points increase month-on-month, although down 260 basis points year-on-year.  

Metals, which had suffered three months of declines, regained some ground, increasing their weight to 2.7%.

Conversely, the Technology sector's weight moderated to 8.8%, decreasing by 40 basis points MoM and 60 basis points YoY. The Oil & Gas sector, meanwhile, continued its downward trend, reaching a nine-month low of 6.2%, marking the sixth consecutive month of decline.

Private Banks (16.1%) was the top sector holding for MFs in Sep’24, followed by Technology (8.8%), Automobiles (8.7%), and Capital Goods (7.5%).

Metals, Retail, Real Estate, Consumer Durables, and Cement sectors witnessed the maximum increase in value MoM.

In terms of individual stock performance, six of the top ten value increases in September were from the Private Banks and Automobile sectors. 

The top sectors where MF ownership vs. the BSE 200 is at least 1% higher: Capital Goods (15 funds over-owned), Healthcare (15 funds over-owned), Consumer Durables (12 funds over-owned), NBFCs (9 funds over-owned), and Chemicals (9 funds over-owned).

The top sectors where MF ownership vs. the BSE 200 is at least 1% lower: Consumer (19 funds under-owned), Oil & Gas (17 funds under-owned), Utilities (15 funds under-owned), Private Banks (13 funds under-owned), and Technology (12 funds under-owned).

HDFC Bank led the way with a valuation increase of Rs 154.3 billion, followed by Mahindra & Mahindra (+Rs 54.2 billion), Axis Bank (+Rs 47 billion), Maruti Suzuki (+Rs 44 billion), ICICI Bank (+Rs 42.8 billion), and Samvardhana Motherson (+Rs 39.6 billion).

As the market navigates these dynamics, the mutual fund sector remains a critical barometer of investor sentiment, reflecting both optimism in certain sectors and caution in the face of rising redemption pressures. The coming months will be pivotal as investors and fund managers adapt to the evolving landscape.

In the Nifty50 space, the highest month-on-month net buying by mutual funds was seen  in Trent (+10.6%), Indusind Bank (+7.4%), Eicher Motors (+7.1%), Wipro (+6%), and Grasim Inds (+5.5%)

In the Nifty Midcap 100 space, the highest MoM net buying in September 24 was observed in Indian Renewable Energy, Hindustan Zinc, Rail Vikas Nigam, Prestige Estates, and Indus Towers.

In the Nifty Smallcap space, highest month-on-month net buying in September 2024 was witnessed in Happiest Minds, IFCI, J&K Bank, Hindustan Copper, and Five-Star Business.

Among the top 25 schemes by AUM, the following reported the highest MoM increase: Nippon India Growth Fund (+3.3% MoM change in NAV), SBI Bluechip Fund (+3.2% MoM), Axis ELSS Tax Saver Fund (+3.2% MoM), Parag Parikh Flexi Cap Fund (+3.1% MoM), and HDFC Flexi Cap Fund (+2.9% MoM).