How MFs churned stocks and sectors in April 2024
Teaser | Telecom was the obvious favourite in April led by Bharti Hexacom, Vodafone Idea, and Indus Towers |
Tag Words | #MutualFunds #MF #LargeCaps #MidCaps #SmallCaps |
APRIL 2024 – AN EVENTFUL MONTH FOR EQUITY FUND FLOWS
To put in a nutshell, the situation in April was almost a reverse of March, with debt funds infusing funds aggressively, predominantly into liquid funds and other short term funds. For the month of April 2024, mutual funds overall saw net inflows of ₹2.39 Trillion, largely led by ₹1.89 Trillion of inflows from debt funds. Equity fund net inflows at ₹18,888 Crore in April 2024, was lower than ₹22,567 Crore in March 2024 and progressively lower compared to February 2024. Within the equity fund theme, flexi cap funds, multi-cap funds and sector funds saw bulk of the inflows. The good news is that small cap funds are back to seeing net inflows while investors appear to prefer large & mid-cap funds over large cap funds.
Let us now turn to the sources of inflows into mutual funds in April 2024. Let us talk about the NFOs first. The total NFO flows in April 2024 were tepid at ₹1,532 Crore, of which active equity funds collected ₹1,269 Crore in the month. The bulk of the flows into equity funds cam from the systematic investment plans (SIPs), which saw record flows of ₹20,371 Crore into SIPs in April 2024. This is the highest ever SIP flows recorded in any month till date. The average monthly SIP flows are up nearly 6-fold in the last 8 years, which is huge. All this translated into domestic mutual funds turning net buyers in Indian equities to the tune of ₹32,824 Crore in April 2024. This was lower than ₹44,233 Crore of MF net investment in equities in March 2024, but it was good enough to offset the FPI selling in the month.
APRIL 2024 – WHICH STOCKS DID INDIAN MUTUAL FUNDS PREFER?
One must remember that ₹32,284 Crore of infusion by mutual funds into equities on a net basis, is nearly $4 Billion. That is big enough to create an impact. But, what are the stocks that the mutual fund bought and sold in the month of April 2024. The MF buying was largely driven by IPOs in the month of April. Here is a quick summary.
HOW MF SECTORAL PREFERENCES SHIFTED IN APRIL 2024?
Before we get into sectoral preferences of equity funds in the Indian context in the month of April, it is important to understand the composition of the equity funds universe in India. In India, equity stocks are owned predominantly by active equity funds. Currently, active equity funds hold Indian equities to the tune of ₹24.74 Trillion (net AUM) as of the close of April 2024. The table below captures the active fund break up as of April 2024.
Active Equity Fund Categories |
No. of Folios (Absolute) |
Net Inflows (₹ in Crore) |
Net AUM (₹ in Crore) |
Multi Cap Fund | 62,83,413 | 2,723.87 | 1,34,861.19 |
Large Cap Fund | 1,38,58,639 | 357.56 | 3,21,048.10 |
Large & Mid Cap Fund | 94,58,793 | 2,638.91 | 2,18,060.95 |
Mid Cap Fund | 1,43,80,224 | 1,793.07 | 3,16,222.62 |
Small Cap Fund | 1,94,02,862 | 2,208.70 | 2,66,109.75 |
Dividend Yield Fund | 9,01,907 | 341.35 | 25,216.76 |
Value Fund/Contra Fund | 63,48,393 | 1,986.73 | 1,57,945.53 |
Focused Fund | 50,87,570 | -328.04 | 1,33,904.73 |
Sectoral/Thematic Funds | 1,90,67,350 | 5,166.05 | 3,13,693.78 |
ELSS | 1,62,28,330 | -144.04 | 2,22,263.37 |
Flexi Cap Fund | 1,45,35,204 | 2,172.93 | 3,64,996.67 |
Total Active Equity Funds | 12,55,52,685 | 18,917.09 | 24,74,323.47 |
Data Source: AMFI
As you can see in the table above, the active equity funds have a total of 12.56 Crore folios while they manage a total AUM of ₹24.74 Trillion on a net basis. However, when we look at sectoral preferences, we don’t look at only the active equity funds, but also the equity holdings in hybrid funds and the substantial equity holdings of index funds and index ETFs, which are basically passive replications of an underlying index. The total equity holdings of the hybrid funds and passive funds in India comes to ₹8.14 Trillion, taking the total value of equity holdings as of April 2024 to ₹32.88 Trillion.
We shall now look at how the sector preference of Indian holdings shifted; both in terms of the absolute change in value and also in terms of percentage change. This would be fair to the largely represented sectors and the smaller sectors. Let us first look at sectoral shifts in the holdings of Indian mutual funds in absolute value terms. We will only look at the top 10 sectors in terms of absolute change in holding value.
Top 10 Sectors |
MCAP-MAR-24 (₹ in Crore) |
MCAP-APR-24 (₹ in Crore) |
MOM Change (₹ in Crore) |
MOM Change (in % terms) |
Banking & Finance | 9,43,922 | 10,07,245 | 63,323 | 6.71% |
Capital Goods | 1,18,131 | 1,34,396 | 16,265 | 13.77% |
Metals & Mining | 1,07,412 | 1,22,661 | 15,249 | 14.20% |
Auto & Auto Ancillaries | 3,07,756 | 3,22,663 | 14,907 | 4.84% |
Telecom | 88,577 | 1,01,748 | 13,171 | 14.87% |
Power | 1,02,156 | 1,14,359 | 12,203 | 11.95% |
Consumer Durables | 60,273 | 70,415 | 10,142 | 16.83% |
Oil & Gas | 2,24,884 | 2,31,632 | 6,748 | 3.00% |
FMCG | 1,67,892 | 1,72,828 | 4,936 | 2.94% |
Chemicals & Fertilizers | 87,363 | 91,896 | 4,533 | 5.19% |
The above data is the absolute growth in the market cap between March 2024 and April 2024 on a sector-wise basis. It must be remembered that this shift is not just by flows but also from value accretion. It is a combination of these two factors. In the above case, the MOM absolute growth is led by banking and financial services, which is hardly a surprise considering the heft that they have in the overall index. However, the subsequent list of industries give us interesting insights into the nature of industry of shifts happening.
For instance, capital goods has seen substantial accretion and the interest appears to be emanating from the expectations of a revival in the capital investment cycle. Metals and mining is another sector that is attracting a lot of value accretion for mutual funds. That is based on the hopes that metals prices will rally on the back of strong demand from China and strong domestic demand in India. Auto and ancillaries have been a mutual fund favourite for a long time. That is a bet on the revival in rural demand and the shift to EVs.
There were some value losers too in the month of April. IT services saw the maximum value loss in absolute terms, followed by infrastructure and diamonds. Let us now shift tack to the percentage gainers in sectoral exposure.
Top 10 Sectors |
MCAP-MAR-24 (₹ in Crore) |
MCAP-APR-24 (₹ in Crore) |
MOM Change (₹ in Crore) |
MOM Change (in % terms) |
Paper | 659 | 773 | 114 | 17.30% |
Consumer Durables | 60,273 | 70,415 | 10,142 | 16.83% |
Telecom | 88,577 | 1,01,748 | 13,171 | 14.87% |
Metals & Mining | 1,07,412 | 1,22,661 | 15,249 | 14.20% |
Capital Goods | 1,18,131 | 1,34,396 | 16,265 | 13.77% |
Plastic Products | 15,149 | 17,035 | 1,886 | 12.45% |
Power | 1,02,156 | 1,14,359 | 12,203 | 11.95% |
Abrasives | 9,595 | 10,668 | 1,073 | 11.18% |
Realty | 41,925 | 46,079 | 4,154 | 9.91% |
Alcohol | 19,942 | 21,906 | 1,964 | 9.85% |
The percentage gains segment in April 2024 throws light on smaller sectors in terms of MF holdings. Paper saw demand while consumer durables and telecom also showed mutual fund interest in the month of April 2024. Otherwise, metals and capital goods figure in the top in terms of percentage accretion in holding value also. That broadly summarizes the story of sector shift in mutual fund holdings in the month of April 2024.
APRIL 2024 THEME – WHICH FUNDS BOUGHT / SOLD MOST DEFENCE STOCKS?
Defence has been an attractive theme for institutional, HNI and retail investors alike. That is hardly surprising considering that global spending on defence is only likely to increase. But, the India defence story is much bigger. The government has made a big effort to in-source defence manufacture and in addition, Indian defence exports have bene growing geometrically over the last few years. Obviously, there has been was a good deal of mutual fund action in the defence stocks in April 2024. Here is a quick summary.
Defence buying in the month of April was seen across the board, although mutual funds continue to be cautious about the recent rally of over 100% in a year and the current valuations of most defence companies in India.
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