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What we read from the MF flows data for November 2022?

  • India Infoline News Service
  • 12 Dec , 2022
  • 9:50 AM
In the last few months a few clear trends have emerged in the mutual fund flows.
  • Mutual Fund investor numbers have been growing in numbers, as measured by the number of folios. Most of the growth has been coming in equity funds followed by passive funds like index funds and index ETFs.
  • Mutual fund investors from Tier-2 and Tier-3 cities are getting a lot more aggressive and also more consistent in investing in mutual funds. This has largely been an outcome of more aggressive market adopted by AMFI and the fund AMCs.
  • SIPs have become the default approach for mutual fund investors to onboard and continue their journey in mutual fund investing. People are not only continuing their SIPs for longer, but SIP flows continue even amidst lumpsum outflows.
  • Indian mutual fund investors are showing a clear preference for equity and equity linked funds over debt funds, as is evident from growing AUM. However, within equity, it is the passive funds that are really contributing to the growth in AUM.
Key takeaways from the November 2022 Mutual Fund flow data

Here is what we read from the mutual fund net flow data for the month of November 2022, put out by AMFI.
  1. Total assets under management (AUM) of the Indian mutual fund segment crossed Rs40 trillion for the first time in its history. This growth has been also supported by the number of folios (unique account numbers) to 13.98 crore folios, which is a barometer of retail spread. However, due to the dollar appreciating to beyond Rs82/$, the dollar AUM still stays below $500 billion.
  2. Overall net flows into mutual funds for November 2022 remained robust at Rs13,264 crore. Equity funds, debt funds and passive funds saw positive net flows in November 2022 while hybrid funds continued to see net outflows in the month.
  3. New fund offerings (NFOs) were robust in the month of November 2022 at Rs7,191 crore, although it is yet to build to previous levels of Rs20,000 crore plus. Closed-ended FTPs accounted for 50% of NFO flows, while the balance was predominantly accounted for by sector funds and index funds.
  4. There is a clear shift in AUM share between active and active debt funds in the last one year. Between November 2021 and November 2022, the AUM of debt funds fell from Rs14.52 trillion to Rs12.57 trillion. During the same period, AUM of equity funds expanded from Rs12.78 trillion to Rs15.58 trillion. This was partially due to favourable market conditions, but also largely due to the colour of the flows into mutual funds.
  5. The big story of the last 1 year has been the rise of alternate fund classes (other than equity and debt funds). Today, they account for about 30% of the total assets under management (AUM) of the mutual fund segment overall. The AUM of the specific passive funds category has surged in last one year from Rs9.42 trillion to Rs11.93 trillion.
  6. Debt funds saw marginal inflows of Rs3,669 crore net in November 2022. The major inflow categories were overnight funds, ultra-short term funds and short duration funds. The categories that saw net selling in the debt funds category were liquid funds, money market funds and corporate bond funds.
  7. Let us turn to the equity fund flows in the month of November 2022. The net inflows were just Rs2,258 crore, despite SIP flows of Rs13,306 crore and NFOs of Rs7,191 crore. That shows large chunks of lumpsum selling in equity funds. Fund categories that saw net buyer in November 2022 were sectoral funds and small cap funds. On the other hand, large cap funds, flexi/multi-cap funds and ELSS funds saw net outflows.
  8. How did the hybrid funds perform. They witnessed outflows of Rs6,477 crore in November 2022; a trend visible in the last few months. Bulk of the net selling came from arbitrage funds at Rs4,075 crore came from arbitrage funds. However, one key trends is that the much fancied balanced advantage funds (BAFs) have been seeing net outflows in the last two months after seeing consistent inflows since the pandemic.
  9. It was the category of passive funds that emerged as the star of the month once again. These passive funds witnessed net inflows of Rs10,394 crore let by index funds at Rs8,602 crore and equity & debt index ETFs saw at Rs1,967 crore in November 2022. Among passive categories, only gold funds saw significant outflows in November, largely because a strong dollar is never conducive to gold demand.
  10. No discussion on mutual fund flows is complete unless we look at the SIP flows. Systematic Investment Plans have become a big hit in the last few years, especially among the retail investors and focussed more on the millennial investors. For the month of November, the net flows from SIPs were to the tune of Rs13,306 crore, the highest on record till date.
  11. One way to compare the SIP flows is to annualize the FY23 SIP flows based on 8 months data which comes to Rs150,872 crore for FY23 as a whole on estimated basis. While this is an estimate, past experience has been that SIP flow estimates after 6 months are fairly realistic. This reflects a growth of 21.12% over FY22 and a growth of 57.03% over the corresponding figure in FY21 . FY23 SIP collections are expected to be 72.58% higher than the average of the last 6 years prior to FY23.
  12. One logical outcome of this growth is that the average monthly SIP ticket (AMST) has grown almost 3.44 times over FY17. In percentage terms, the growth has been steady over the last two fiscal years. What is gratifying is that this growth has come in tandem with growth in SIP folios and SIP AUMs, which is a major positive story of retail spread.
  13. What about SIP folios and SIP AUMs in November 2022? SIP folios increased from 593.30 lakhs in October 2022 to 604.57 lakhs; crossing the 6 crore mark for the first time in November 2022. It reflects a net accretion of 11.27 lakh SIP folios or 1.90%. What about SIP AUM? The SIP AUM has grown 0.29% MOM in November 2022 from Rs664,781 crore to Rs683,852 crore.
  14. Finally, we take a sneak peak at the SIP Stoppage ratio, which is the ratio of SIP accounts discontinued in a specified period to new SIP accounts opened. Lower this ratio, the better it is. SIP stoppage ratio was 57.84% in FY20 and 60.88% in FY21 amidst COVID panic. This reduced sharply to 41.74% in FY22. However, for in FY23, the SIP stoppage ratio has once again risen to 52.92% levels, showing some signs of panic at higher levels.
That has broadly been the story of mutual fund flows in the month of November 2022. For now, the big opportunity in SIP arises from a growing middle class in India and a rising millennial population. At 6 crore SIP folios in a population of 140 crore, India may have just scratched the surface. That remains the billion dollar opportunity.

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What the Big-3 Mutual Funds bought and sold in December 2022

  • 18 Jan , 2023
  • 1:42 PM
  • In December 2022, debt funds saw net outflows of Rs21,947 crore while net inflows into equity funds were subdued at Rs7,303 crore.

Passive funds saw strong inflows of Rs15,398 crore during December 2022. There are 2 points to note here. Firstly, the NFO collections were robust at Rs8,486 crore in November 2022, but these NFO flows were dominated by bond ETFs, multi-asset allocation funds and closed ended Fixed Term Plans (FTP).

Gross monthly SIP flows for December 2022 touched record highs of Rs13,573 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, although one must admit that the SIP stoppage ratio has gone up recently, probably due to uncertainty and higher inflation. The big question is what the big funds did with these flows. We look at portfolio shifts of 3 largest equity fund houses viz. SBI MF, ICICI Prudential MF and HDFC MF. 

Big 10 fund houses and the AUM they control

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

Top Fund Houses ranked

By equity fund AUM

Equity AUM (Rs crore)

As on 31-Dec-2022

SBI Mutual Fund

₹ 466,010

ICICI Prudential Mutual Fund

₹ 241,770

HDFC Mutual Fund

₹ 217,160

UTI Mutual Fund

₹ 166,040

Nippon India Mutual Fund

₹ 163,200

Axis Mutual Fund

₹ 139,480

Kotak Mutual Fund

₹ 139,280

Aditya Birla SL Mutual Fund

₹ 112,550

Mirae Asset Mutual Fund

₹ 102,920

DSP Mutual Fund

₹ 67,520

Data Source: AMFI

In December 2022, equity fund AUM of major fund houses tapered as NFO flows were largely focused on the debt side while the markets ended in the negative in the month of December, leading to depletion in value. On equity AUM front, ICICI Prudential AMC maintained its gap over HDFC MF, while UTI and Nippon India Fund are moving up rapidly. Bancassurance names still account 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 look at the buy and sell actions of the 3 biggest AMCs by equity AUM for December 2022 viz. SBI MF, ICICI Pru MF and HDFC MF. Let us start with the biggest player in the Indian mutual fund segment.

SBI MF key trades in equity markets in December 2022

SBI Mutual Fund is the largest by overall AUM and equity AUM by a margin. In fact, the equity AUM of SBI MF at Rs4.66 trillion is more than the combined equity AUM of ICICI Prudential and HDFC MF as of end December 2022. The top equity holdings of SBI MF are ICICI Bank, Reliance Industries and HDFC Bank. Here are the major stocks that SBI MF bought and sold in the month.

In December 2022, IPO participation was back and they dominated the fresh purchases by SBI MF. Let us first look at the 2 fresh investments made by SBI Mutual Fund in the month of December into IPOs. SBI MF invested Rs92.08 crore in Sula Vineyards IPO and Rs82.56 crore in Elin Electronics IPO. Apart from these IPO investments, SBI MF also made fresh investments of Rs1.57 crore in Sagar Cements, Rs0.47 crore in BEML Ltd and Rs0.31 crore in UCO Bank. Apart from these fresh buys, SBI MF added to its existing positions in several stocks in December 2022. SBI MF added 349.71 lakh shares of Bank of Baroda, 127.50 lakh shares of Bank of India and 0.49 lakh shares of Sundaram Fasteners during the month. 

Let us now turn to the exits made by SBI MF in December 2022. During the month, SBI MF fully exited small positions in 3 stocks viz; Allcargo Logistics, NIIT Ltd, Saregama India Ltd and Shipping Corporation of India (SCI). There were also stocks where SBI MF reduced existing positions. In December 2022, SBI MF sold 5.72 lakh shares of Oil India Ltd, 1.99 lakh shares of Greenpanel Industries Ltd and 1.50 lakh shares of Happiest Minds Technologies.

ICICI Prudential MF key trades in equity markets in December 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 Rs2.42 trillion makes it an influential player in the equity space. The top equity holdings of ICICI Prudential MF are ICICI Bank, HDFC Bank and Infosys. Here is a look at what ICICI Pru MF bought and sold in December 2022.

ICICI Prudential Mutual Fund was not active in the IPO market in December 2022. During the month, ICICI Pru MF made fresh investments in Rainbow Children’s Medicare Ltd of Rs131.97 crore. In addition, ICICI Prudential Mutual Fund also made small fresh investments in Repco Home Finance, BEML Ltd, Supreme Petrochem, Eureka Forbes and Lloyds Metals and Energy Ltd. The fund added to existing positions in several stocks. It added 17.98 lakh shares of Nippon Life Asset Management Ltd, 9.59 lakh shares of Sapphire Foods and 0.38 lakh shares of Lemontree Hotels Ltd.

Let us turn to stocks that ICICI Pru MF exited totally and where it reduced its stake. In December 2022, ICICI Prudential MF fully exited small residual holdings in four stocks viz; Dhanuka Agritech, SpiceJet Ltd, Strides Pharma Science Ltd and Vakrangee Ltd. There were also stocks where ICICI Prudential MF reduced holdings in December 2022. It cut its stake in Amara Raja Batteries by 2.86 lakh shares, Shipping Corporation of India by 0.12 lakh shares and Saregama India Ltd by 0.05 lakh shares. 

HDFC Mutual Fund key trades in equity markets in December 2022

HDFC Mutual Fund may have dropped to third position in equity AUM rankings, but at Rs2.17 trillion, its equity shifts still remain a key influencing factor in the markets. As of December 2022, the top equity holdings of HDFC MF were ICICI Bank, HDFC Bank, SBI, Infosys and Reliance Industries. 

HDFC MF was extremely active in IPOs. It made fresh IPO investments in Sula Vineyards Rs27.87 crore, Uniparts Ltd Rs27.27 crore and Landmark Cars Rs22.92 crore during the month of December 2022. In the secondary market, HDFC MF made fresh purchases of Motilal Oswal Financial Services worth Rs34.32 crore, Fortis Healthcare Rs25.69 crore and Credit Access Grameen Rs13.77 crore. It also made fresh purchases in smaller quantities in Vodafone Idea Ltd and Zydus Lifesciences Ltd. HDFC MF also used the volatility in select stocks to add more at lower levels. It added 8.48 lakh shares of L&T Finance Holdings, 2.07 lakh shares of NMDC Ltd and 1.98 lakh shares of Coromandel International.

Let us turn to stock exits. HDFC MF exited some of its small residual investments in its entirety. This include small quantities of Abbott India Ltd, Polycab India Ltd and Amara Raja Batteries Ltd. In addition, HDFC MF also reduced its positions in Indian Energy Exchange Ltd by 20.44 lakh shares, Adani Enterprises Ltd by 5.58 lakh shares and Berger Paints Ltd by 0.97 lakh shares.

That was the crux of the MF churn story in December 2022? Funds bought selectively in stocks where correction has been steep as well as in select IPOs. However, they also used the volatility to exit stocks where headwinds are strong or momentum is low. Despite headwinds, the bias appears to be towards domestic India based investment stories.

Dec-22 MF flows flat, but SIPs and NFOs hold the fort

  • 12 Jan , 2023
  • 10:31 AM
  • For December 2022, inflows into active equity funds remained positive, but flows into active debt funds were deeply in the negative.

The redeeming feature of the month was the flows into index funds and ETFs, which actually helped flows. December 2022 repeated the SIP story, touching a record level of Rs13,573 crore in December 2022. Secondly, new fund offerings (NFOs) also gathered steam in December 2022 collecting Rs8,486 crore. 

The NFO flows in December 2022 were largely dominated by bond ETFs, multi-asset allocation funds and closed ended fixed term plans (FTP). Let us quickly turn to the AUM story for December 2022. Assets under management (AUM) is the combination of flows and capital accretion and includes the AUM of equity, debt and hybrids.

Month

Debt AUM 

(Rs trillion)

Equity AUM 

(Rs trillion)

Alternate AUM 

(Rs trillion)

Overall AUM 

(Rs trillion)

Dec-21

14.05

13.34

9.72

37.73

Jan-22

14.13

13.38

9.89

38.01

Feb-22

14.09

12.95

9.91

37.56

Mar-22

12.99

13.65

10.31

37.57

Apr-22

13.56

13.66

10.42

38.04

May-22

13.22

13.32

10.40

37.22

Jun-22

12.34

12.86

10.20

35.64

Jul-22

12.46

14.16

10.88

37.75

Aug-22

13.03

14.78

11.26

39.34

Sep-22

12.42

14.63

11.12

38.42

Oct-22

12.45

15.22

11.58

39.50

Nov-22

12.57

15.58

11.93

40.38

Dec-22

12.42

15.25

11.92

39.89

Data Source AMFI

The overall AUM of the mutual fund industry as of the close of December 2022 stood at Rs39.89 trillion, slightly lower than in November 2022, due to the fall in the index during the month. Here are some key takeaways.

  • The overall AUM has been in a very narrow range for the past one year. Most of the volatility in AUM has come from sharp swings in the equity market indices plus sharp swings in benchmark bond yields. 

     
  • If you compare the AUM of active equity funds and active debt funds, there has been a complete reversal of roles over last 12 months. In December 2021, active debt had an overall AUM of Rs14.05 trillion and active equity had AUM of Rs13.34 trillion. As of December 2022, overall AUM of active debt funds has fallen to Rs12.42 trillion while AUM of active equity is up to Rs15.45 trillion. It is a complete reversal of roles; but this can be largely attributed to market contribution.

     
  • The big takeaway is that the AUM of alternate assets built heft from Rs9.72 trillion to Rs11.92 trillion in last one year. Active fund managers have struggled to beat the index, forcing investors to gravitate towards passive index funds and index ETFs. Alternative fund have come with more granular offerings. Alternative assets include hybrids, passives and allocation funds.

Let us now turn to debt mutual fund flows for the month of December 2022.

Debt fund flows face quarterly treasury pressure in December 2022

In the last one year, debt fund flows have been under pressure and have actually been negative in all the quarters. For the month of December 2022, debt funds saw net outflows of Rs21,947 crore. This is almost a third of the debt outflows seen in September 2022. The reasons for outflows are quite apparent. At the end of each quarter, debt funds witness outflows due to treasury operations of corporates. Companies park in debt funds for short term and they need funds to pay advance taxes. Active debt funds have also faced pressure of flows due to excess hawkishness of the RBI and the US Federal Reserve.

Here is a quick summary of the colour of debt fund flows in December 2022. The funds that saw positive inflows were limited. Ultra-short duration funds saw inflows of Rs1,737 crore while long duration funds saw inflows of Rs324 crore. Clearly, the overall flows in active debt funds were biased towards the sell side as is evident from the large net selling number. Treasury managers have been cautious about longer term debt since longer duration bonds are more vulnerable to rise in bond yields.

We now turn to the larger universe of debt funds that saw outflows in December 2022. Big selling was visible in Liquid funds Rs13,852 crore, Floater Funds Rs2,240 crore, Medium Duration funds Rs1,800 crore, Banking & PSU Funds Rs1,353 crore, Overnight funds Rs1,254 crore, Money Market Funds Rs915 crore, short duration funds Rs783 crore and corporate bond funds Rs713 crore. With bond yields hovering around 7.3%, the pressure on debt funds is quite obvious. The recent RBI MPC minutes also hinted at continued hawkishness.

NFOs, SIPs boosted active equity fund flows in December 2022

Equity fund flows in December 2022 were relatively tepid at Rs7,303 crore. The big thrust to equity flows came from Rs8,486 crore of NFO flows and Rs13,573 crore of SIP flows. Now for the equity fund inflow story! During December 2022, small cap funds led the way with Rs2,245 crore of inflows. Among other key contributors, Mid Cap funds collected Rs1,962 crore and large & mid cap funds saw inflows of Rs1,190 crore. The combination of Multi-cap funds plus flexi-cap funds saw inflows of Rs1,080 crore. Other fund categories that saw meaningful inflows include value funds at Rs648 crore and ELSS funds at Rs564 crore. Investors are betting on alpha and shifting large cap fund allocations to index funds.

There were some equity fund categories with negative flows too. For instance, sectoral funds saw outflows of Rs204 crore and focused funds Rs164 crore. One parameter that tells you the story of equity fund flows very eloquently is folio accretion. Folios are MF investor accounts and give a fairly good idea of retail spread. As of the close of December 2022, equity folios touched an all-time high of 949.39 lakh folios out of total mutual fund folios of 1,411.20 lakhs; or 67.28% share of overall folios. It must be added that passive fund folios have grown to 208.51 lakhs; or a significant 14.8% of the total folios.

Hybrid flows turn around, but passive flows steal the show

Hybrid fund flows turned around to a positive Rs2,255 crore in December 2022; largely because of NFO flows into Baroda BNP multi-asset allocation fund. Even arbitrage funds saw a turnaround to positive flows in the month, after several months of consistent negative flows in arbitrage funds. However, the NFOs of the highly popular Balanced Advantage Funds (BAF) is yet to pick up. Multi asset allocation funds saw inflows of Rs1,711 crore, largely driven by the Baroda BNP NFO. Arbitrage fund saw net inflows of Rs883 crore while the BAFs saw outflows of Rs413 crore.

Passive funds were again the big story of December 2022, witnessing healthy inflows of Rs15,398 crore as investors looked for lower cost alpha. What is more interesting is that the gross flows into passive funds at Rs28,319 crore is inching very close to the gross flows into active equity funds. The passive surge was led by equity & debt index ETFs at Rs8,788 crore followed by index funds at Rs6,737 crore. Passive funds cornered bulk of the NFO flows.

Three key takeaways from the December 2022 MF flows

The story of mutual fund flows in December 2022 can be summed up in 3 key takeaways.

  1. Equity fund flows are not substantially decoupled from the equity market conditions and that is largely thanks to steady SIP flows.

     
  2. The interesting data is that the debt fund with the highest AUM as of December 2022 is bond index ETFs, which stands at Rs4.97 trillion.

     
  3. In equity and in debt, there seems to have been a major shift out of active investing into passive investing. That could be the trend going ahead too.

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In December 2022, debt funds saw net outflows of Rs21,947 crore while net inflows into equity funds were subdued at Rs7,303 crore.

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