During the month of July 2020, Indian mutual funds added close to 5.64 lakh folios and the total number of unique folios stands at 9.21 crore as of July. However, if we were to remove the duplicate folios using PAN mapping, there would still be around 2 crore unique folios.
Each month, the data on folio shifts is a strong indicator of which way the wind is blowing in terms of preferences of mutual fund investors. We shall look at the trends in July 2020 of equity funds, debt funds and other classes of funds to understand how the folio shift is panning out and what it means.
Folio shift in debt funds – How it panned out in Jul-20?
According to data put out by AMFI, there are about 68.65 lakh debt fund folios across all categories of debt funds. Relatively, the number of folios in debt funds will be substantially lower as the investors are predominantly HNIs, corporates, banks and other institutions. The chart below captures the major folio additions in July 2020.
Of course, these are absolute numbers and not percentage change in folios. However, this still gives a broadly positive picture that new investors have been entering into debt funds in the month of July. In absolute terms, the focus seems to be on corporate bond funds and liquid funds as well as the short and medium duration funds. Long duration funds and overnight funds were the least preferred if one goes by the folio accretion in Jul-20. Out of the 5.64 lakh folios added, debt funds accounted for 4.25 lakh folios.
Folio shift in equity funds – How it panned out in Jul-20?
In the case of equity fund folios, the contrary pulls were a lot more visible. Some categories offunds saw positive folio accretion while equal number of fund categories saw folio depletion. The graph below captures the folio shift within equity funds for July 2020.
Unlike debt funds where there were folio accretions across the board, the folios shifts in equity funds have been more balanced. There seems to be clear retail and individual interest building up in sectoral funds and focused funds. There was also accretion in diversified funds like large cap funds and multi cap funds. Of course, the ELSS fund folio accretion can be attributed more to the mandatory tax saving needs. But there have been folio depletions too in a number of categories.
For example, there was a rush out of mid cap funds and small cap funds. It could be attributed to profit booking in these specific categories of funds as also a flight to safety.Investors found large caps and multi caps more attractive and safer at these levels in the midst of the market volatility. Contra funds have been among the low performers and that also saw a sharp reduction in folios. Interestingly, in the month of July, most of the folio accretion happened in debt funds with equity funds seeing net depletion in folios. Of course, with 6.37 crore folios, equity funds still account for over 70% of all folios in the mutual fund industry.
Folio shift in miscellaneous funds – How it panned out in Jul-20?
The month of July 2020 was interesting for mutual fund folio analysis in multiple ways. Even as many equity fund categories saw folio depletion, most of the miscellaneous categories saw smart accretion in folios during the month. For example, there was a sharp increase in the gold fund folios, largely explained by the rapid rise in the price of gold. With 40% return between April and August 2020, gold has emerged as a hedge and also a good aggressive investment. Global FOFs (fund of funds) also saw strong folio accretion as there was a rush to diversify the India investment story.
But the biggest accretion of folios happened in the Bharat Bond ETFs that saw close to 1.40 lakh folios being added. With 38.80 lakh folios, this category still remains the smallest, but clearly the 6% folio accretion in a single month shows that investors are beginning to experiment beyond the traditional equity and debt funds alone. Surely, passive as a theme appears to be picking up in India in a big way. That could be the good news from an allocation perspective!