What the Big-3 Mutual Funds bought and sold in July 2022
- India Infoline News Service
- 15 Aug , 2022
- 11:13 AM
For the month of July 2022, the net inflows into debt funds and equity funds were positive. While debt fund flows turned around in July, equity flows tapered. However, the big action point was the inflows into passive funds, which actually led the way. Investors are cautious on debt due to rising yields, but are still positive on equity from a long term perspective. An important consideration in these markets is what the big AMCs are doing. Here we look at the portfolio shifts of the 3 largest mutual fund houses by equity fund AUM viz. SBI MF, ICICI Prudential MF and HDFC MF.
Here is how much of equity funds the Big-10 manage
Since our focus here is on the stocks that mutual funds bought and sold in July 2022, we benchmark on equity AUM rather than overall AUM.
Data Source: AMFI
In July 2022, equity fund AUM of most major funds surged over as the Nifty spiked by 8.4%. In terms of equity AUM, ICICI Prudential AMC has widened its gap over HDFC MF, while Nippon India Fund and UTI are moving up rapidly. The top ranks are still dominated by the bancassurance names, account for half of the top-10 MF players.
Here is why the top-10 AMCs matter. They account for over 90% of industry-wide equity AUM. As a proxy, we focus on the buy and sell actions of the 3 biggest AMCs by equity AUM for July 2022. These are the bellwether names that set the tone in the market.
Key equity portfolio shifts at SBI MF for July 2022
SBI Mutual Fund is the largest by overall AUM and equity AUM. In fact, the equity AUM of SBI MF at Rs4.15 trillion is almost equal to the equity AUM of ICICI Pru and HDFC MF combined. The top equity holdings of SBI MF are Reliance Industries, ICICI Bank, HDFC Bank and Infosys. Here are the major stocks that SBI MF bought and sold in July 2022.
July 2022 was another month of IPO drought. With IPOs drying up, it was about secondary market action. SBI Mutual Fund made fresh investment in just one stock during the month of July as it bought Chambal Fertilizers worth Rs3.48 crore. In addition, SBI MF added to its existing positions in several stocks. Here are positions that saw accretion in July 2022. SBI MF added 1.22 lakh shares of Persistent Systems, 2.70 lakh shares of Rain Industries and a smaller quantity of Max Financial Services to its existing portfolio.
SBI MF fully exited several stocks. It sold entire holdings worth Rs22.33 crore in Escorts Kubota, Rs3.75 crore stake in NBCC, Rs2.84 crore stake in Firstsource Solutions, Rs2.79 crore stake in Whirlpool, Rs2.45 crore stake in Solara Active Pharma, Rs1.44 crore stake in Indiabulls Housing and Rs1.19 crore stake in Intellectual Design Arena. Let us also look at stocks wherein SBI MF pared positions. In July 2022, SBI MF sold 12.85 lakh shares of Indian Terrain Fashions, 4.57 lakh shares of IGL and 1.43 lakh shares of MTAR. Clearly, SBI MF has used higher levels in July 2022 to pare stakes wherever possible to lighten its portfolio.
Key equity portfolio shifts at ICICI Prudential MF for July 2022
ICICI Pru AMC has been the second largest fund by overall AUM and also by equity AUM for more than a year. Its equity AUM at Rs2.23 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 quick look at what ICICI Pru MF bought and sold in the month of July 2022.
ICICI Prudential Mutual Fund repeated the story of June and did not buy any fresh stock in July 2022. The fund was using higher levels on the Nifty to consolidate its holdings rather than going overboard on the market amidst global headwinds that are far from favourable.
However, ICICI Pru MF did add to its positions in select stocks it already held. It added 9.07 lakh shares of Oil India Ltd, 4.82 lakh shares of Vardhman Textiles and 3.94 lakh shares of Chambal Fertilizers.
Let us look at the stocks that ICICI Pru MF exited in totality and where it reduced its stake. During July 2022, ICICI Prudential MF took total exit from Ashoka Buildcon (the road construction company), selling its entire stake worth Rs121.68 crore. There were no other stocks that ICICI Prudential Mutual Fund exited in the month of July 2022. There were also stocks where ICICI Prudential MF pared holdings in July 2022. It cut its stake in Indiabulls Housing Finance by 6.55 lakh shares, Kansai Nerolac Paints by 0.76 lakh shares and sold a much smaller quantity of 8,409 shares in Astra Zeneca during July 2022.
Key equity portfolio shifts at HDFC MF for July 2022
HDFC Mutual Fund may have dropped to third position in equity AUM rankings, but at Rs1.99 trillion, its equity shifts still remain a key influencing factor. As of July 2022, the top equity holdings of HDFC MF were ICICI Bank, HDFC Bank, SBI, Infosys and Reliance.
Fresh buying by HDFC MF was seen in just one stock. It made fresh buys of Rs1.54 crore in Deepak Nitrite, where operations have normalized after the fire incident at the factory in Gujarat. HDFC MF also used the correction in select stocks to add more at lower levels to buffer its holdings. It added 99.13 lakh shares of Zomato Ltd, 11.49 lakh shares of Coforge and 0.41 lakh shares of Sanofi India in July 2022 on attractive valuations.
Let us turn to stock exits. HDFC MF used the bounce in the Nifty and the mid-cap indices to fully exit a number of stocks. It sold its stake worth Rs121.68cr in Blue Star, Rs6.48 crore in Angel One, Rs1.54 crore in Rain Industries, Rs1.27 crore in Astral Ltd and Rs0.51 crore in Metropolis Healthcare. In addition, HDFC MF also cut its positions in Rites Ltd by 53.79 lakh shares, Indus Towers by 5.64 lakh shares and Dalmia Bharat by 0.50 lakh shares.
What is the gist of the MF churn story in July 2022? Funds have bought selectively in stocks where correction has been steep. Otherwise, funds have used higher levels to pare positions and sit on cash ahead of the market uncertainty. It remains to be seen, what happens once the IPO fever also starts to grip the markets.
Here is how much of equity funds the Big-10 manage
Since our focus here is on the stocks that mutual funds bought and sold in July 2022, we benchmark on equity AUM rather than overall AUM.
|
Top Fund Houses ranked By equity fund AUM |
Equity AUM (Rs crore) As on 31-Jul-2022 |
|---|---|
| SBI Mutual Fund | ₹ 414,640 |
| ICICI Prudential Mutual Fund | ₹ 222,630 |
| HDFC Mutual Fund | ₹ 199,140 |
| Nippon India Mutual Fund | ₹ 154,080 |
| UTI Mutual Fund | ₹ 152,720 |
| Axis Mutual Fund | ₹ 140,340 |
| Kotak Mutual Fund | ₹ 130,800 |
| Aditya Birla SL Mutual Fund | ₹ 110,810 |
| Mirae Asset Mutual Fund | ₹ 95,160 |
| DSP Mutual Fund | ₹ 65,630 |
In July 2022, equity fund AUM of most major funds surged over as the Nifty spiked by 8.4%. In terms of equity AUM, ICICI Prudential AMC has widened its gap over HDFC MF, while Nippon India Fund and UTI are moving up rapidly. The top ranks are still dominated by the bancassurance names, account for half of the top-10 MF players.
Here is why the top-10 AMCs matter. They account for over 90% of industry-wide equity AUM. As a proxy, we focus on the buy and sell actions of the 3 biggest AMCs by equity AUM for July 2022. These are the bellwether names that set the tone in the market.
Key equity portfolio shifts at SBI MF for July 2022
SBI Mutual Fund is the largest by overall AUM and equity AUM. In fact, the equity AUM of SBI MF at Rs4.15 trillion is almost equal to the equity AUM of ICICI Pru and HDFC MF combined. The top equity holdings of SBI MF are Reliance Industries, ICICI Bank, HDFC Bank and Infosys. Here are the major stocks that SBI MF bought and sold in July 2022.
July 2022 was another month of IPO drought. With IPOs drying up, it was about secondary market action. SBI Mutual Fund made fresh investment in just one stock during the month of July as it bought Chambal Fertilizers worth Rs3.48 crore. In addition, SBI MF added to its existing positions in several stocks. Here are positions that saw accretion in July 2022. SBI MF added 1.22 lakh shares of Persistent Systems, 2.70 lakh shares of Rain Industries and a smaller quantity of Max Financial Services to its existing portfolio.
SBI MF fully exited several stocks. It sold entire holdings worth Rs22.33 crore in Escorts Kubota, Rs3.75 crore stake in NBCC, Rs2.84 crore stake in Firstsource Solutions, Rs2.79 crore stake in Whirlpool, Rs2.45 crore stake in Solara Active Pharma, Rs1.44 crore stake in Indiabulls Housing and Rs1.19 crore stake in Intellectual Design Arena. Let us also look at stocks wherein SBI MF pared positions. In July 2022, SBI MF sold 12.85 lakh shares of Indian Terrain Fashions, 4.57 lakh shares of IGL and 1.43 lakh shares of MTAR. Clearly, SBI MF has used higher levels in July 2022 to pare stakes wherever possible to lighten its portfolio.
Key equity portfolio shifts at ICICI Prudential MF for July 2022
ICICI Pru AMC has been the second largest fund by overall AUM and also by equity AUM for more than a year. Its equity AUM at Rs2.23 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 quick look at what ICICI Pru MF bought and sold in the month of July 2022.
ICICI Prudential Mutual Fund repeated the story of June and did not buy any fresh stock in July 2022. The fund was using higher levels on the Nifty to consolidate its holdings rather than going overboard on the market amidst global headwinds that are far from favourable.
However, ICICI Pru MF did add to its positions in select stocks it already held. It added 9.07 lakh shares of Oil India Ltd, 4.82 lakh shares of Vardhman Textiles and 3.94 lakh shares of Chambal Fertilizers.
Let us look at the stocks that ICICI Pru MF exited in totality and where it reduced its stake. During July 2022, ICICI Prudential MF took total exit from Ashoka Buildcon (the road construction company), selling its entire stake worth Rs121.68 crore. There were no other stocks that ICICI Prudential Mutual Fund exited in the month of July 2022. There were also stocks where ICICI Prudential MF pared holdings in July 2022. It cut its stake in Indiabulls Housing Finance by 6.55 lakh shares, Kansai Nerolac Paints by 0.76 lakh shares and sold a much smaller quantity of 8,409 shares in Astra Zeneca during July 2022.
Key equity portfolio shifts at HDFC MF for July 2022
HDFC Mutual Fund may have dropped to third position in equity AUM rankings, but at Rs1.99 trillion, its equity shifts still remain a key influencing factor. As of July 2022, the top equity holdings of HDFC MF were ICICI Bank, HDFC Bank, SBI, Infosys and Reliance.
Fresh buying by HDFC MF was seen in just one stock. It made fresh buys of Rs1.54 crore in Deepak Nitrite, where operations have normalized after the fire incident at the factory in Gujarat. HDFC MF also used the correction in select stocks to add more at lower levels to buffer its holdings. It added 99.13 lakh shares of Zomato Ltd, 11.49 lakh shares of Coforge and 0.41 lakh shares of Sanofi India in July 2022 on attractive valuations.
Let us turn to stock exits. HDFC MF used the bounce in the Nifty and the mid-cap indices to fully exit a number of stocks. It sold its stake worth Rs121.68cr in Blue Star, Rs6.48 crore in Angel One, Rs1.54 crore in Rain Industries, Rs1.27 crore in Astral Ltd and Rs0.51 crore in Metropolis Healthcare. In addition, HDFC MF also cut its positions in Rites Ltd by 53.79 lakh shares, Indus Towers by 5.64 lakh shares and Dalmia Bharat by 0.50 lakh shares.
What is the gist of the MF churn story in July 2022? Funds have bought selectively in stocks where correction has been steep. Otherwise, funds have used higher levels to pare positions and sit on cash ahead of the market uncertainty. It remains to be seen, what happens once the IPO fever also starts to grip the markets.
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What the Big-3 Mutual Funds bought and sold in October 2022
- India Infoline News Service
- 16 Nov , 2022
- 9:55 AM
For the month of October 2022, debt funds saw net outflows of a subdued Rs2,818 crore while the net inflows into equity funds were positive at Rs9,390 crore. Passive funds also saw strong inflows of Rs10,261 crore during the month. However, there are two other factors to note during the month. Firstly, the NFO action continued to remain robust at Rs5,439 crore in October 2022, driven by sectoral and index funds. In addition, monthly SIP flows for October 2022 touched record highs of Rs13,041 crore, despite strong global headwinds and stock market volatility. The big question is what did the big funds do with all this money that came in. We look at portfolio shifts of the 3 largest fund houses by equity fund AUM viz. SBI MF, ICICI Prudential MF and HDFC MF for October 2022.
Big-10 by Equity AUM and how much they control?
Since our focus here is on the stocks that mutual funds bought and sold in October 2022, we benchmark on equity AUM rather than overall AUM. The table below is the ranking of AMCs based on their equity AUM rankings as of end October 2022.
Data Source: AMFI
In October 2022, equity fund AUM of major fund houses surged as the NFO flows combined with SIP flows were robust. But, markets also got a lot of help from markets that have been a lot more bullish in the month of October 2022. In terms of equity AUM, ICICI Prudential AMC widened its gap over HDFC MF, while UTI and Nippon India Fund are moving up rapidly. The top ranks are dominated by the bancassurance names, accounting for half of the top-10 MF players. Mirae crossed Rs1 trillion equity AUM during October 2022.
The top-10 AMCs matter because they not only account for over 90% of industry-wide equity AUM, but also set the tone and the tempo for the stock market action by dealers and are closely tracked by traders. As a proxy, we focus on the buy and sell actions of the 3 biggest AMCs by equity AUM for October 2022. SBI MF, ICICI Pru MF and HDFC MF are the bellwether names that set the tone for markets.
Key equity portfolio shifts at SBI MF for October 2022
SBI Mutual Fund is the largest by overall AUM and equity AUM. In fact, the equity AUM of SBI MF at Rs4.57 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 October 2022.
October 2022 was a month where IPO action was visible after a break. With IPO action still building up, it was more about secondary market action. SBI Mutual Fund made fresh investment in just a number of stock during the month of October 2022. SBI MF bought Rs16.56 crore worth of Garden Reach Shipbuilders, Rs13.44 crore of RITES, Rs9.68 crore of Astral Ltd, Rs4.80 crore of Supreme Industries, Rs1.70 crore of Varun Beverages and Rs1.69 crore of Tata Elxsi. In addition, SBI MF also bought smaller quantities of KPIT Technologies and CG Power and Industrial Solutions. Apart from these fresh buys, SBI MF added to its existing positions in several stocks in October 2022. SBI MF added 8.32 lakh shares of Voltas, 4.75 lakh shares of Petronet LNG and 0.41 lakh shares of Shriram Transport Finance during October 2022.
Now for the exits. SBI MF fully exited one stock during October 2022. It sold its entire holdings worth Rs1.20 crore in Aarti Industries. Let us also look at stocks where SBI MF reduced existing positions. In October 2022, SBI MF sold 55.09 lakh shares of HUDCO, 15.14 lakh shares of Sadbhav Engineering and 0.51 lakh shares of Metropolis Healthcare.
Key equity portfolio shifts at ICICI Prudential MF for October 2022
ICICI Pru AMC has been the second largest fund by overall AUM and also by equity AUM for more than a year. Its equity AUM at Rs2.37 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 the month of October 2022.
ICICI Prudential Mutual Fund was an aggressive buyer in the IPO of Tracxn Technologies. In fact, the fund bought Rs54.21 crore worth of Tracxn Technologies in the IPO during the month of October. In addition, ICICI Pru MF also added to its existing positions in several stocks. It added 6.09 lakh shares of Indiabulls Housing Finance, 5.64 lakh shares of Sumitomo Chemicals India Ltd and 1.19 lakh shares of Shoppers Stop.
Let us look at the stocks that ICICI Pru MF exited in totality and where it reduced its stake. During October 2022, ICICI Prudential MF took total exit from Aarti Industries selling its entire stake worth Rs1.42 crore in the company, which was the sold exit by ICICI Prudential MF. There were also stocks where ICICI Prudential MF reduced its holdings in October 2022. It cut its stake in Power Finance Corporation by 40.79 lakh shares while it also reduced its stake in Metropolis Healthcare and BASF India Ltd by much smaller quantities.
Key equity portfolio shifts at HDFC MF for October 2022
HDFC Mutual Fund may have dropped to third position in equity AUM rankings, but at Rs2.12 trillion, its equity shifts still remain a key influencing factor. As of October 2022, the top equity holdings of HDFC MF were ICICI Bank, HDFC Bank, SBI, Infosys and Reliance.
Fresh buying by HDFC MF was seen in the IPO of Electronics Mart India Ltd to the tune of Rs22.87 crore. In the secondary market, HDFC MF made fresh purchases of Granules India worth Rs5.89 crore and GNFC worth Rs5.62 crore. In addition, HDFC MF also bought fresh stocks in smaller quantities of Astral Ltd, Coromandel International and Polycab India Ltd. HDFC MF also used the volatility in select stocks to add more at lower levels to buffer its holdings. It added 2.11 lakh shares of Hindustan Copper, 2.05 lakh shares of Birlasoft Ltd and 1.87 lakh shares of L&T Finance Holdings Ltd.
Let us turn to stock exits. HDFC MF exited several stocks in totality during the month of October 2022. It sold its entire stake worth Rs30.30 crore in Bank of India, Rs13.65 crore in NMDC Ltd, Rs1.60 crore in Rain Industries, Rs0.58 crore in PVR Ltd and Rs0.25 crore in Deepak Nitrite. In addition, HDFC MF also cut its positions in NALCO by 7.35 lakh shares, Amara Raja Batteries by 0.28 lakh shares and a small quantity of Page Industries.
Here is the crux of the MF churn story in October 2022? Funds have bought selectively in stocks where correction has been steep but have also used the volatility to exit stocks where the headwinds are strong or momentum is low. Overall, it was an eventful month for MFs.
Big-10 by Equity AUM and how much they control?
Since our focus here is on the stocks that mutual funds bought and sold in October 2022, we benchmark on equity AUM rather than overall AUM. The table below is the ranking of AMCs based on their equity AUM rankings as of end October 2022.
|
Top Fund Houses ranked By equity fund AUM |
Equity AUM (Rs crore) As on 31-Oct-2022 |
|---|---|
| SBI Mutual Fund | ₹ 457,330 |
| ICICI Prudential Mutual Fund | ₹ 236,480 |
| HDFC Mutual Fund | ₹ 211,470 |
| UTI Mutual Fund | ₹ 164,910 |
| Nippon India Mutual Fund | ₹ 164,720 |
| Axis Mutual Fund | ₹ 144,010 |
| Kotak Mutual Fund | ₹ 139,040 |
| Aditya Birla SL Mutual Fund | ₹ 113,190 |
| Mirae Asset Mutual Fund | ₹ 101,340 |
| DSP Mutual Fund | ₹ 68,080 |
In October 2022, equity fund AUM of major fund houses surged as the NFO flows combined with SIP flows were robust. But, markets also got a lot of help from markets that have been a lot more bullish in the month of October 2022. In terms of equity AUM, ICICI Prudential AMC widened its gap over HDFC MF, while UTI and Nippon India Fund are moving up rapidly. The top ranks are dominated by the bancassurance names, accounting for half of the top-10 MF players. Mirae crossed Rs1 trillion equity AUM during October 2022.
The top-10 AMCs matter because they not only account for over 90% of industry-wide equity AUM, but also set the tone and the tempo for the stock market action by dealers and are closely tracked by traders. As a proxy, we focus on the buy and sell actions of the 3 biggest AMCs by equity AUM for October 2022. SBI MF, ICICI Pru MF and HDFC MF are the bellwether names that set the tone for markets.
Key equity portfolio shifts at SBI MF for October 2022
SBI Mutual Fund is the largest by overall AUM and equity AUM. In fact, the equity AUM of SBI MF at Rs4.57 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 October 2022.
October 2022 was a month where IPO action was visible after a break. With IPO action still building up, it was more about secondary market action. SBI Mutual Fund made fresh investment in just a number of stock during the month of October 2022. SBI MF bought Rs16.56 crore worth of Garden Reach Shipbuilders, Rs13.44 crore of RITES, Rs9.68 crore of Astral Ltd, Rs4.80 crore of Supreme Industries, Rs1.70 crore of Varun Beverages and Rs1.69 crore of Tata Elxsi. In addition, SBI MF also bought smaller quantities of KPIT Technologies and CG Power and Industrial Solutions. Apart from these fresh buys, SBI MF added to its existing positions in several stocks in October 2022. SBI MF added 8.32 lakh shares of Voltas, 4.75 lakh shares of Petronet LNG and 0.41 lakh shares of Shriram Transport Finance during October 2022.
Now for the exits. SBI MF fully exited one stock during October 2022. It sold its entire holdings worth Rs1.20 crore in Aarti Industries. Let us also look at stocks where SBI MF reduced existing positions. In October 2022, SBI MF sold 55.09 lakh shares of HUDCO, 15.14 lakh shares of Sadbhav Engineering and 0.51 lakh shares of Metropolis Healthcare.
Key equity portfolio shifts at ICICI Prudential MF for October 2022
ICICI Pru AMC has been the second largest fund by overall AUM and also by equity AUM for more than a year. Its equity AUM at Rs2.37 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 the month of October 2022.
ICICI Prudential Mutual Fund was an aggressive buyer in the IPO of Tracxn Technologies. In fact, the fund bought Rs54.21 crore worth of Tracxn Technologies in the IPO during the month of October. In addition, ICICI Pru MF also added to its existing positions in several stocks. It added 6.09 lakh shares of Indiabulls Housing Finance, 5.64 lakh shares of Sumitomo Chemicals India Ltd and 1.19 lakh shares of Shoppers Stop.
Let us look at the stocks that ICICI Pru MF exited in totality and where it reduced its stake. During October 2022, ICICI Prudential MF took total exit from Aarti Industries selling its entire stake worth Rs1.42 crore in the company, which was the sold exit by ICICI Prudential MF. There were also stocks where ICICI Prudential MF reduced its holdings in October 2022. It cut its stake in Power Finance Corporation by 40.79 lakh shares while it also reduced its stake in Metropolis Healthcare and BASF India Ltd by much smaller quantities.
Key equity portfolio shifts at HDFC MF for October 2022
HDFC Mutual Fund may have dropped to third position in equity AUM rankings, but at Rs2.12 trillion, its equity shifts still remain a key influencing factor. As of October 2022, the top equity holdings of HDFC MF were ICICI Bank, HDFC Bank, SBI, Infosys and Reliance.
Fresh buying by HDFC MF was seen in the IPO of Electronics Mart India Ltd to the tune of Rs22.87 crore. In the secondary market, HDFC MF made fresh purchases of Granules India worth Rs5.89 crore and GNFC worth Rs5.62 crore. In addition, HDFC MF also bought fresh stocks in smaller quantities of Astral Ltd, Coromandel International and Polycab India Ltd. HDFC MF also used the volatility in select stocks to add more at lower levels to buffer its holdings. It added 2.11 lakh shares of Hindustan Copper, 2.05 lakh shares of Birlasoft Ltd and 1.87 lakh shares of L&T Finance Holdings Ltd.
Let us turn to stock exits. HDFC MF exited several stocks in totality during the month of October 2022. It sold its entire stake worth Rs30.30 crore in Bank of India, Rs13.65 crore in NMDC Ltd, Rs1.60 crore in Rain Industries, Rs0.58 crore in PVR Ltd and Rs0.25 crore in Deepak Nitrite. In addition, HDFC MF also cut its positions in NALCO by 7.35 lakh shares, Amara Raja Batteries by 0.28 lakh shares and a small quantity of Page Industries.
Here is the crux of the MF churn story in October 2022? Funds have bought selectively in stocks where correction has been steep but have also used the volatility to exit stocks where the headwinds are strong or momentum is low. Overall, it was an eventful month for MFs.
Funds with the best risk adjusted returns
- 13 Feb , 2023
- 6:09 AM
- In the world of mutual funds analysis, the most difficult task is to compare apples and oranges.
For instance, you cannot compare the returns of an equity fund with that of a debt fund or a commodity fund. Even within equities, it is hard to compare the returns of a large cap fund with a small cap fund or even a growth fund with a value fund. However, amidst this apples versus oranges debate, the one way to compare these diverse categories of funds is on the basis of risk-adjusted returns.
Using risk adjusted returns for mutual funds?
There are several different ways to use risk adjusted returns. One way is to use the Treynor ratio that uses Beta as a measure or risk. The other is to use the Sharpe approach, using standard deviation as a measure of risk. The third approach is to use the Fama based decomposition of returns to separate the fund manager driven returns. The problem with these approaches is their complexity and the dependence on assumptions.
To overcome these problems, we look at risk-adjusted returns from a different perspective. Firstly, instead of individual funds we look at fund categories. This overcomes variances in individual performance. Secondly, we use total risk since the assumption that unsystematic risk is diversified is rather fanciful. However, instead of the standard deviation we use the category range as a measure of risk.
How equity funds rank on risk adjusted returns?
Here we look at equity oriented funds across various categories based on 1 year returns; ranked on range-adjusted returns.
Morningstar Category | Category Average | Top Performer | Bottom Performer | Category Range | Range Adjusted Returns |
| Sector-Financial Services | 7.78 | 9.84 | 1.48 | 8.36 | 0.9306 |
| Contra | 6.14 | 11.90 | 1.36 | 10.54 | 0.5825 |
| Dividend Yield | 3.65 | 8.31 | -1.91 | 10.22 | 0.3571 |
| Equity-Infrastructure | 5.10 | 19.37 | -1.97 | 21.34 | 0.2390 |
| Value | 3.21 | 9.51 | -6.28 | 15.79 | 0.2033 |
| Small-Cap | 2.33 | 12.30 | -5.68 | 17.98 | 0.1296 |
| Mid-Cap | 2.34 | 13.44 | -7.14 | 20.58 | 0.1137 |
| Multi-Cap | 2.04 | 12.41 | -6.45 | 18.86 | 0.1082 |
| Large & Mid-Cap | 0.82 | 21.46 | -12.99 | 34.45 | 0.0238 |
| Large-Cap | 0.51 | 8.68 | -12.96 | 21.64 | 0.0236 |
| ELSS (Tax Savings) | 0.20 | 10.40 | -11.68 | 22.08 | 0.0091 |
| Focused Fund | -1.14 | 15.34 | -14.31 | 29.65 | -0.0384 |
| Flexi Cap | -1.33 | 11.96 | -11.67 | 23.63 | -0.0563 |
| Equity-ESG | -1.71 | 9.43 | -10.21 | 19.64 | -0.0871 |
| Sector-Healthcare | -6.31 | 0.03 | -22.50 | 22.53 | -0.2801 |
| Sector-Technology | -9.86 | -0.88 | -18.44 | 17.56 | -0.5615 |
Data Source: Morningstar
Here are some of the major takeaways. We have excluded FMCG outperformance since the category has only one fund and hence is not representative. The fund category that has done well on risk-adjusted returns is the financial services fund while the bottom performer is the Technology funds. That is hardly surprising.
Financials saw the best traction in last one year due to the positive loan spreads while IT bore the brunt of domestic salary costs, attrition, global weakness etc. Interestingly, contra and dividend yield were among the other top performing categories. The bottom performing categories over the last one year included healthcare and ESG funds too.
How debt funds rank on risk adjusted returns?
Here we look at debt oriented funds across various categories based on 1 year returns and have then ranked them on range adjusted returns.
Morningstar Category | Category Average | Top Performer | Bottom Performer | Category Range | Range Adjusted Returns |
| 10yr Government Bond | 2.41 | 3.05 | 0.82 | 2.23 | 1.0807 |
| Long Duration | 3.27 | 4.71 | 1.35 | 3.36 | 0.9732 |
| Money Market | 4.59 | 6.26 | 0.12 | 6.14 | 0.7476 |
| Low Duration | 4.34 | 6.04 | -0.01 | 6.05 | 0.7174 |
| Ultra-Short Duration | 4.60 | 6.50 | 0.03 | 6.47 | 0.7110 |
| Government Bond | 2.91 | 5.48 | -1.49 | 6.97 | 0.4175 |
| Dynamic Bond | 3.75 | 11.76 | - | 11.76 | 0.3189 |
| Corporate Bond | 3.07 | 5.34 | -5.01 | 10.35 | 0.2966 |
| Floating Rate | 4.41 | 16.78 | 0.75 | 16.03 | 0.2751 |
| Banking & PSU | 3.30 | 10.73 | -1.64 | 12.37 | 0.2668 |
| Medium to Long Duration | 3.31 | 11.30 | -1.92 | 13.22 | 0.2504 |
| Short Duration | 4.41 | 27.76 | -1.07 | 28.83 | 0.1530 |
| Medium Duration | 3.93 | 25.94 | -1.87 | 27.81 | 0.1413 |
Data Source: Morningstar
Here are some major takeaways. We ignored the Credit risk fund underperformance since the category returns are skewed by low base returns on one fund. The fund category that has done well on risk-adjusted returns basis is the long duration funds and the 10-year government security funds. Normally, long duration funds tend to underperform in a rising interest scenario, but these are the ones to outperform in the last one year.
That is less about returns and more about the low risk entailed in these funds. Among the worst performers on a risk adjusted category were short duration and medium duration funds. Clearly, here again, the issue is not about returns, but about risk. The moral of the story is that in difficult market conditions and challenging macro environment, the outperformers have not been the return chasers but the risk managers.
How Miscellaneous funds rank on risk adjusted returns?
Having seen the risk-adjusted performance of pure equity and pure debt funds, we categorized all other funds into a residual category. This includes the hybrid funds, the passive funds and the commodity funds.
Morningstar Category | Category Average | Top Performer | Bottom Performer | Category Range | Range Adjusted Returns |
| Sector - Precious Metals | 13.75 | 17.43 | 4.50 | 12.93 | 1.0634 |
| Arbitrage Fund | 4.48 | 6.14 | 1.35 | 4.79 | 0.9353 |
| Dynamic Asset Allocation | 3.99 | 14.40 | -3.59 | 17.99 | 0.2218 |
| Equity Savings | 2.48 | 6.86 | -5.31 | 12.17 | 0.2038 |
| Conservative Allocation | 3.82 | 21.80 | -3.96 | 25.76 | 0.1483 |
| Liquid | 4.69 | 46.80 | - | 46.80 | 0.1002 |
| Aggressive Allocation | 1.29 | 7.74 | -6.09 | 13.83 | 0.0933 |
| Balanced Allocation | -1.25 | -0.66 | -1.89 | 1.23 | -1.0163 |
Data Source: Morningstar
On risk adjusted terms, the top performer among miscellaneous funds are gold funds. Thanks to the geopolitical risk, gold has been a sought after asset in the last one year and that is evident from the risk-adjusted returns. Arbitrage funds have also been among the top performers, but that is more because the discretionary allocation funds have not done well.
In a sense, the volatile markets have been hardly conducive for any form of discretionary asset allocation. The highly popular Balance Advantage Funds (BAFs) have been among the worst performers in terms of risk-adjusted returns and that explains why investor interest in this category has been waning of late. For the last one year, passive gold ruled the roost.
Did change basis 5 years risk adjusted returns?
All the above risk-adjusted returns analysis have been done on 1-year returns and one can argue that they are vulnerable to short-term moves. Hence we undertook a similar analysis of 5-year risk-adjusted returns. Here are some of the key findings.
- We start with equity funds risk-adjusted returns over 5 years on CAGR basis. Again we exclude FMCG as an outlier, so the top performing equity funds over 5 years on risk adjusted returns are ESG funds, technology funds and healthcare funds. Infrastructure, ELSS funds and small cap funds were among the bottom performers over 5 years.
- How about debt funds over 5-year risk-adjusted returns? Even on a risk adjusted basis, 10-year government bond funds and long duration funds figured in the top-3 categories. The surprise inclusion is floating rate funds. At the bottom of the heap are credit risk funds, dynamic funds and medium duration funds; classic discretionary risks.
- How did the other categories perform over 5 years. Once again, gold funds are on the top, with allocation funds doing a lot better over a 5 year period. Liquid funds are at the bottom, not due to low returns but due to high risk.
Risks adjusted analysis of fund categories always have an interesting story to tell. If not anything else, it underlines the importance of focusing more on asset allocation and less on fund selection.
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