One of the key parameters used to gauge the growth and reach of mutual funds is the assets under management. AMFI has now published MF flow and AUM data up to February 2023, so a comparison with February 2022 gives an illustrative picture of how the AUMs have moved over the year and what has triggered this shift in AUMs over the last one year. 

Macro picture of mutual funds AUM

The table captures the overall picture of the assets under management (AUM) of mutual funds, spread across open-ended funds and close-ended funds.

Data Source: AMFI

At a macro level, the AUM of Indian mutual funds grew by 5.06%, entirely driven by growth in open ended funds. The close-ended funds not only saw the number of schemes reducing by more than half on a yoy basis, but even the close-ended AUM almost halved over last year. The open-ended funds saw AUM accretion of 5.94%, largely driven by flows into equity schemes and passive funds and little contribution from market level wealth creation.

How AUM of active debt funds moved over last year?

The table captures the movement in the AUM of debt funds over last year across various active debt fund categories.

Data Source: AMFI

Let us look at the number of active debt fund schemes first, which have fallen marginally over last year. The only category to see new schemes was the long duration category as investors preferred to lock in their funds at higher yields. Most of the other flows came into debt index funds, which are classed separately. Out of 17 schemes, only 3 schemes (with longer duration) saw accretion in AUM, with the other 14 categories seeing fall in AUM over last year. There was a clear preference away from many of the shorter duration schemes with substantial discretion offered to the fund manager. Overall debt funds saw compression in AUMs by 12.75% over last year, with floater funds, banking funds and shorter duration funds being the worst hit in terms of AUM compression.

AUM of active equity funds gave a good show last year?

Here, we capture the movement in the AUM of active equity funds over last year across various categories of active equity and growth funds.

Data Source: AMFI

Out of the 12 categories of active equity funds, all the categories saw accretion in AUMs over last year. What about number of schemes. One must remember that current regulations restrict any AMC from launching more than one scheme of the same category, except in case of flexi-cap funds and sectoral / thematic funds. Hence, you would typically see the accretion coming from that category, unless a new AMC comes into the picture or an existing AMC is not represented in any particular category. However, the 16% AUM accretion over last year has largely been an outcome of increase in the number of folios, SIP flows and a persistent supply of NFO money into equity oriented active funds. 

Another interesting trend is that bulk of the inflows have gone into mid cap and small cap fund; apart from multi cap funds. Clearly, investors seem to be leaning towards stocks beyond the top 100 stocks to generate alpha in their portfolios. In the last few years, the mid cap and small cap funds have not disappointed the investors and that impact is now showing in the AUM accretion in these funds. The 16% AUM accretion over last year is despite the markets hardly gaining 3-4% at an index level on a yoy basis.

AUM growth of hybrid and solutions funds over last year

Here, we capture the movement in the AUM of active hybrid funds and solution funds over last year across various categories. For simplicity, hybrid funds have been combined with solution-based funds.

Data Source: AMFI

Out of the 8 categories of hybrid and solution funds, six categories have shown decisively positive growth in AUM, while the AUM of equity savings funds have been flat. The only category to see a sharp fall in the AUM over last year is Arbitrage Funds, where the AUM has fallen 23.9% over last year. However, it must be remembered that arbitrage funds are not exactly equity/debt hybrids. Instead, then are more of a treasury product and with weak arbitrage returns, there had been a lot of unwinding in arbitrage funds in the last one year.

Despite a small base, the slew of NFOs allowed the multi-asset allocation funds to grow AUM at 37.1% yoy. Dynamic asset allocation Funds (BAFs) had a field period in FY22, but FY23 has not been to favourable for these funds and that is showing in tepid growth in AUM. Overall, the AUM of hybrid and solutions funds have grown by 3%, but what is gratifying is that the AUM at Rs5.19 trillion, makes them an interesting MF asset class.

But it was Passive Funds that ruled the AUM game

Here, we capture the movement in the AUM of passive index-based funds and ETFs. These refer to index funds in equity and debt and have been the big growth story. 

Data Source: AMFI

Passive funds have, perhaps, been the real story of the last one year. It is not just the 36.3% growth in AUM over last year, but even the unprecedented 50.4% growth in the number of passive schemes. There are two reasons for this growth. Firstly, there are no AMC limits on the number of passive funds and that has helped growth. However, that alone was not sufficient. There has been a subtle shift from active to passive investing as active fund managers (like their global counterparts) struggle to beat the index. As Jack Bogle said, “Why look for a needle in the haystack, when you can buy the entire haystack”.

The biggest takeaway from the AUM growth data is that passive funds and hybrid funds have a combined AUM of nearly Rs12 trillion as of date. This makes these alternate funds the third pillar of the India mutual funds story; apart from active equity funds and active debt funds. That is the big takeaway from the AUM data.

There are 2 other factors of note. Firstly, the NFO collections were robust at Rs7,199 crore in November 2022, but more than half of that came from Fixed Maturity Plans (FMPs). The balance was dominated by sectoral funds and index funds. 

Monthly SIP flows for November 2022 touched record highs of Rs13,306 crore, despite strong global headwinds. Investors are not only being added to SIPs (as evidenced by rising folios), but investors are also staying put through the highs and lows. That is good news. The big question is what the big funds did with the money that came in. We look at portfolio shifts of 3 largest equity fund houses viz. SBI MF, ICICI Prudential MF and HDFC MF. 

How much AUM do the Big 10 AMCs control?

Before looking at what the mutual funds bought and sold in November 2022, here is the ranking of the top AMCs on equity AUM as of November 2022.

Data Source: AMFI

In November 2022, equity fund AUM of major fund houses surged as NFO flows combined with SIP flows were robust. There was also help from robust stock markets. On equity AUM, ICICI Prudential AMC maintained its gap over HDFC MF, while UTI and Nippon India Fund are moving up rapidly. Bancassurance names accounted for half of the top-10 players. 

These top-10 AMCs account for over 90% of industry-wide equity AUM, and hence their actions are closely tracked by traders and investors. As a proxy, we focus on the buy and sell actions of the 3 biggest AMCs by equity AUM for November 2022 viz. SBI MF, ICICI Pru MF and HDFC MF. Here is how it looks!

What SBI MF bought and sold in November 2022

SBI Mutual Fund is the largest by overall AUM and equity AUM. In fact, the equity AUM of SBI MF at Rs4.75 trillion is more than the combined equity AUM of ICICI Prudential and HDFC MF. The top equity holdings of SBI MF are ICICI Bank, Reliance Industries, HDFC Bank and Infosys. Here are the major stocks that SBI MF bought and sold in November 2022.

In November 2022, IPO participation was back at SBI MF. Let us first look at the 2 fresh investments made by SBI Mutual Fund in the month of November; and both were incidentally IPOs. During the month of November 2022, SBI MF invested Rs452.60 crore in Archean Chemical Industries IPO and Rs417.87 crore in the Global Health (Medanta) IPO. These were the only two fresh buys that SBI MF undertook in November, committing substantial funds to these IPOs. Apart from these fresh buys, SBI MF added to its existing positions in several stocks in November 2022. SBI MF added 3.01 lakh shares of Krishna Institute of Medical Sciences (KIMS), 30.12 lakh shares of HUDCO Ltd and 0.88 lakh shares of Polycab India Ltd during the month.

Let us now turn to the exits made by SBI MF in November 2022. During the month, SBI MF fully exited three stocks, but two out of these were due to an amalgamation. It fully exited its holdings worth Rs131.93 crore in Shriram City Union Finance, which merged into Shriram Transport Finance Ltd to create Shriram Finance Ltd. It also exited its Rs60.98 crore holding in Mindtree, which merged into L&T Infotech to create LTI Mindtree Ltd. In addition, SBI MF exited its small Rs1.13 crore holdings in Sadbhav Engineering Ltd. There were also stocks where SBI MF reduced existing positions. In November 2022, SBI MF sold 34.39 lakh shares of NCC Ltd, 5.05 lakh shares of Rain Industries and 0.17 lakh shares of Dixon Technologies.

What ICICI Prudential MF bought and sold in November 2022

ICICI Pru AMC is the second largest fund by overall AUM and equity AUM for more than two years now. Its equity AUM at Rs2.45 trillion makes it an influential player in the equity space. The top equity holdings of ICICI Prudential MF are ICICI Bank, Infosys and HDFC Bank. Here is a look at what ICICI Pru MF bought and sold in November 2022.

ICICI Prudential Mutual Fund was also an aggressive buyer in IPOs in November 2022. During the month, ICICI Pru MF made fresh IPO investments in Archean Chemical Industries Rs57.09 crore, Fusion Micro Finance Rs51.95 crore, Global Health (Medanta) Rs45.41 crore, Inox Green Energy Rs35.34 crore, Bikaji Foods International Rs20.55 crore and Kaynes Technology Rs17.30 crore. ICICI Pru MF also bought fresh Rs5.57 crore of Sarda Energy from the secondary market. The fund added to existing positions in several stocks. It added 29.46 lakh shares of PCBL, 91.32 lakh shares of Delhivery and 0.28 lakh shares of RH Magnesita.

Let us turn to stocks that ICICI Pru MF exited totally and where it reduced stake. In November 2022, ICICI Prudential MF fully exited its Rs195.54 crore stake in Mindtree due to its merger with LTI and a small stake in Shriram City Union due to its merger with Shriram Transport Finance. It also fully exited its Rs8 crore position in Craftsman Automation. There were also stocks where ICICI Prudential MF reduced holdings in November 2022. It cut its stake in GIC RE by 12.40 lakh shares, IIFL Wealth by 7.21 lakh shares and Ratnamani Metals and Tubes by 1.64 lakh shares. 

What HDFC Mutual Fund bought and sold in November 2022

HDFC Mutual Fund may have dropped to third position in equity AUM rankings, but at Rs2.20 trillion, its equity shifts still remain a key influencing factor. As of November 2022, the top equity holdings of HDFC MF were ICICI Bank, HDFC Bank, SBI, Infosys and Reliance. 

HDFC MF was extremely active in IPOs. It made fresh IPO investments in DCX Systems Rs73.67 crore, Archean Chemical Industries Rs57.09 crore, Global Health (Medanta) Rs45.41 crore, Five Star Business Finance Rs43.03 crore, Bikaji Foods International Rs20.55 crore, Kaynes Technology Rs17.30 crore and Inox Green Energy Rs9.35 crore. In the secondary market, HDFC MF made fresh purchases of Intellect Design Arena worth Rs15.47 crore, SAIL Rs13.54 crore and NMDC Rs4.49 crore. HDFC MF also used the volatility in select stocks to add more at lower levels. It added 6.84 lakh shares of NALCO, 14.39 lakh shares of IDFC First Bank and 1.30 lakh shares of LTI Mindtree, due to merger.

Let us turn to stock exits. HDFC MF exited its Rs81 crore position in Mindtree and its Rs39.06 crore position in Shriram City Union Finance on account of merger. It also sold Rs0.23 crore worth of holdings in Zydus Lifesciences. In addition, HDFC MF also reduces its positions in ICICI Prudential Life by 20.63 lakh shares, Zomato by 55.56 lakh shares and Alembic Pharma by 12.83 lakh shares.

That is the gist of the MF churn story in November 2022? Funds bought selectively in stocks where correction has been steep but also used the volatility to exit stocks where headwinds are strong or momentum is low. Mutual funds have used the volatility to the hilt to add value to their portfolios.