 "mutual fund equity market")
While February 2024 saw a record inflow of money into mutual funds overall, a larger share went into debt funds (bonds) compared to equity funds (stocks). This suggests investors might have become more cautious due to some market volatility.
As of February 2024, individual investors have 84 per cent of their mutual fund assets in equity schemes and 11 per cent in active debt funds. Liquid funds at 3% and ETFs at 2% are fairly insignificant. Large-cap stocks (established companies) performed well, mid-cap (medium-sized companies) and small-cap (smaller companies) underperformed in February. This could be because investors preferred larger, more stable companies during a slightly uncertain market.
Sectoral/thematic funds received more than Rs 11,000 crore of investor money, mainly due to the recent SBI Energy Opportunities Fund NFO.
Thematic funds explained:
Imagine a basket filled with different colored fruits. A regular equity mutual fund might be like a mixed fruit basket, containing apples, oranges, and bananas. Thematic funds, on the other hand, are more like a basket filled with just one kind of fruit, say, a "Berry Basket" with strawberries, blueberries, and raspberries. These funds focus on a specific theme or trend, like infrastructure, artificial intelligence, or electric vehicles.Thematic funds can be a good option for investors with a strong understanding of a specific sector and a high-risk tolerance.
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Are individual investors playing a bigger role in mutual fund AUM as compared to institutional investors; a perceptible trend in recent months?
"If you look at the AUM share, the answer is fairly unequivocal and this can be largely attributed to the surge in SIP flows, especially from the Gen-Z and millennial investors into mutual funds. In February 2024, gross SIP flows were at a record high of Rs 19,187 Crore; a classic barometer of retail appetite for equity funds. Between February 2023 and February 2024, the share of individual investors in the overall AUM composition has gone up by 270 basis points from 57.60% to 60.30%. However, on MOM basis, the share of individuals in mutual fund AUM has gone up by 20 bps from 60.1% to 60.3%; which is despite the strong debt market flows in February 2024. At the same time, the share of institutions and corporates in the overall mutual fund AUM has fallen over the last one year from 42.4% to 39.7%. It was only in December 2023, that the share of retail crossed 60% and the share of institutional had fallen below 40%," said brokerage IIFL in a note.
Here are the equity funds that saw the most investor interest last month:
- Thematic/Sectoral funds: This category saw flows to the tune of Rs 11, 357 crore
- Large and mid-cap funds: This fund category had net inflows of Rs 3157 crore
- Small cap funds: This fund category saw flows of Rs 2922 crore
- Multi-cap funds: This category saw flows of Rs 2414 crore
- Flexi-cap funds (including focussed funds): This category saw net inflows of Rs 2080 crore
- Value Oriented funds: This category had net inflows of Rs 1,867 crore
- Mid-cap funds: This category had net inflows of Rs 1,808 crore
- Large-cap funds: This category saw inflows to the tune of Rs 921 crore
- ELSS: This category had net inflows of Rs 339 crore
"Among the equity asset class, the Sectoral/Thematic Funds category saw the highest inflows to the tune of INR 11,262.7 crores. The category was aided by the launch of five new schemes during the month (Groww Banking & Financial Services Fund; quant PSU Fund; SBI Energy Opportunities Fund; WhiteOak Capital Banking & Financial Services Fund; WhiteOak Capital Pharma and Healthcare Fund) which cumulatively garnered Rs 7,178 crore during their NFO period.
The Large and Midcap category saw the second highest flows during the month among the equity categories- INR 3,156.6 crores aided by the launch of Bajaj Finserv Large and Mid Cap Fund and PGIM India Large and Mid Cap Fund which cumulatively garnered Rs 925 crore," said Melvyn Santarita, Analyst, Morningstar Investment Research India Private Limited
Which sectors did investors put money into?
Healthcare: This sector has been a consistent performer in recent years, and February was no different. Funds with significant holdings in healthcare companies likely benefited from investor interest.
Capital Goods and NBFCs: Companies that manufacture equipment for other businesses (capital goods) and non-banking financial institutions (NBFCs) also witnessed interest from investors. These sectors are seen as potential growth drivers for the Indian economy.
Consumer Durables and Chemicals: These sectors also saw a rise in investor interest through equity funds, indicating a potential positive outlook on domestic consumption and industrial activity.
Most bought stocks:
HDFC Life, Adani Enterprises, Britannia, Kotak Mahindra Bank and Wipro were the most bought Nifty50 stocks by mutual funds in February 2024, while n Devyani Intl, Indus Towers, Godrej Properties, Aditya Birla Capital, and Oil India were the most bought in the mid-cap space, shows data analysed by brokerage Motilal Oswal.
In the small-cap space, the highest month-on-month net buying in February 2024 was witnessed in Kalyan Jewellers, Data Patterns, Mahanagar Gas, Latent View Analytics, and Indiamart Intermesh.
The top 10 stocks that saw the maximum month-on-month increase in value were SBI, Reliance Industries, TCS, Maruti Suzuki, Power Grid Corp., Whirlpool of India, ICICI Bank, M&M, Coal India, and L&T.
The stocks that witnessed the maximum month-on-month decline in value were ITC, Hindalco Industries, Bajaj Finance, One 97 Communications, Bharti Airtel, Cholamandalam Investment & Finance, NHPC, REC, Ashok Leyland, and NMDC.
