POLITICAL UNCERTAINTY HITS MARKETS IN MAY 2024
May 2024 was a month in which the FPIs continued to be net sellers. FPIs sold Indian equities worth $3,666 Million in the secondary markets, but were net buyers in the IPO market to the tune of $603 million, ending the month as net sellers to the tune of $3,063 Million in equities overall. However, the FPIs were net buyers in debt and hybrids in May 2024 to the tune of $1,522 Million, ending up as overall net sellers to the tune of $1,541 million for May 2024. For calendar 2024 so far, FPIs were net sellers in equities to the tune of $2,770 million but the aggressive buying in debt ensured that at an overall level, the FPIs were still net buyers to the tune of $5,834 Million. However, the deluge of domestic money from Indian mutual funds and LIC (which manage over $1.1 trillion between them, has ensured that the markets did not have much to worry about.
The month of May 2024 was marked by elevated levels of political uncertainty and a mixed outcome of Q4 results. Let us talk about the results first. The sales revenue growth in Q4 was better than previous quarters, but that was largely on account of a boost in banking top line. However, profit performance was not too great due to cost pressures and banks facing thinning markets. Political uncertainty continued to be the name of the game, especially with VIX rising to above the 24 levels. However, there were two pieces of good tidings on the last day of May. The Q4 GDP growth came in at 7.8%, against the street expectations of 6.5%, resulting in full year FY24 GDP growth at a whopping 8.2%. To spice up the story further, the fiscal deficit for FY24 came in at just 5.6% of GDP, 20 bps lower than the revised fiscal deficit target of 5.8% of GDP. This fiscal prudence is likely to go down well with the equity and bond markets; although we will get to see the impact only next week.
BOND YIELDS FALL SHARPLY IN MAY 2024
For the month of May 2024, the 10-year benchmark yields started off at around 7.16%, but fell sharply after the RBI announced its bumper dividend of ₹2.11 trillion to the Indian government. That is hardly surprising. The surge in the RBI dividend by more than 100% above the interim budget estimates means that the government now has the ammunition to push the fiscal deficit even below the initial FY25 fiscal deficit estimates of 5.1%. Alternatively, it is also possible that the government may choose to use these funds to enhance their capex outlay for the year. For FY25, the government had cut the capex growth from 30% to 11%. However, this additional dividend boost allows the government to set the capex growth at 20% for FY25. If you add the lower 5.6% fiscal deficit for FY24, we could see the bond yields tapering further from current levels. That should be value accretive to equities and pave the way for rate cuts by the RBI after the full budget in July.
Top performing Direct Plans (Growth Option) on 5-year returns (as on 31st May-24):
Name of Fund | 1-Year Return | 3-Year Return | 5-Year Return |
Baroda BNP Paribas Large (G) | 39.051% | 19.320% | 18.777% |
JM Large Cap (G) | 45.534% | 21.344% | 18.563% |
ICICI Pru Blue-Chip Fund (G) | 37.548% | 20.380% | 18.442% |
Category Average | 31.680% | 16.037% | 15.664% |
S&P BSE 100 (TR) Index | 27.357% | 16.106% | 16.113% |
Data Source: Morningstar |
Top performing Direct Plans% (Growth Option) on 5-year returns (as on 31st May-24):
Name of Fund | 1-Year Return | 3-Year Return | 5-Year Return |
Quant Active Fund (G) | 52.337% | 25.139% | 30.581% |
Mahindra Manulife Multi (G) | 49.204% | 24.877% | 25.707% |
Nippon India Multi Cap (G) | 51.078% | 31.575% | 22.312% |
Category Average | 44.098% | 22.551% | 21.731% |
S&P BSE 500 (TR) Index | 34.698% | 18.077% | 18.043% |
Data Source: Morningstar |
Top performing Direct Plans (Growth Option) on 5-year returns (as on 31st May-24):
Name of Fund | 1-Year Return | 3-Year Return | 5-Year Return |
Quant Flexi Cap Fund (G) | 60.952% | 28.381% | 32.436% |
JM Flexi Cap Fund (G) | 63.385% | 30.379% | 25.648% |
PPFAS Flexi Cap Fund (G) | 33.086% | 21.198% | 24.557% |
Category Average | 36.589% | 18.259% | 17.885% |
S&P BSE 500 (TR) Index | 34.698% | 18.077% | 18.043% |
Data Source: Morningstar |
Top performing Direct Plans (Growth Option) on 5-year returns (as on 31st May-24):
Name of Fund | 1-Year Return | 3-Year Return | 5-Year Return |
Quant Mid-Cap Fund (G) | 75.466% | 34.955% | 35.649% |
Motilal Oswal Mid-Cap(G) | 50.794% | 36.095% | 28.592% |
Mahindra Manulife Mid-Cap (G) | 61.660% | 28.846% | 28.288% |
Category Average | 49.596% | 24.548% | 23.962% |
S&P BSE Midcap (TR) Index | 59.919% | 26.771% | 24.642% |
Data Source: Morningstar |
Top performing Direct Plans (Growth Option) on 5-year returns (as on 31st May-24):
Name of Fund | 1-Year Return | 3-Year Return | 5-Year Return |
Quant Small Cap Fund (G) | 66.283% | 35.053% | 41.456% |
BOI Small Cap Fund (G) | 48.777% | 27.221% | 33.354% |
Nippon Small Cap Fund (G) | 54.130% | 33.508% | 31.792% |
Category Average | 46.258% | 26.158% | 27.210% |
S&P BSE Midcap (TR) Index | 56.056% | 37.068% | 27.190% |
Data Source: Morningstar |
Top performing Direct Plans (Growth Option) on 5-year returns (as on 31st May-24):
Name of Fund | 1-Year Return | 3-Year Return | 5-Year Return |
Quant Tax Plan (G) | 60.898% | 28.410% | 34.068% |
BOI ELSS Tax Saver (G) | 55.667% | 24.807% | 26.709% |
SBI Long Term Equity Fund (G) | 57.178% | 27.168% | 22.771% |
Category Average | 36.464% | 18.700% | 18.017% |
S&P BSE 200 (TR) Index | 32.557% | 17.308% | 17.447% |
Data Source: Morningstar |
Top performing Direct Plans (Growth Option) on 5-year returns (as on 31st May-24):
Name of Fund | 1-Year Return | 3-Year Return | 5-Year Return |
UTI Next 50 Index Fund (G) | 61.072% | 21.953% | 20.023% |
DSP Nifty-50 Equal Weight (G) | 61.109% | 22.058% | 19.787% |
LIC MF Nifty Next-50 Fund (G) | 60.677% | 21.986% | 19.757% |
Category Average | 41.821% | 17.483% | 15.455% |
Benchmark Index | N.A. | N.A. | N.A. |
Data Source: Morningstar |
Top performing Direct Plans (Growth Option) on 5-year returns (as on 31st May-24):
Name of Fund | 1-Year Return | 3-Year Return | 5-Year Return |
Quant Absolute Fund (G) | 40.390% | 21.470% | 25.526% |
BOI S&M Equity and Debt (G) | 49.742% | 23.858% | 23.142% |
ICICI Pru Equity & Debt (G) | 37.543% | 23.833% | 20.932% |
Category Average | 28.982% | 15.676% | 15.415% |
CRISIL MIF Blended Index PR | 10.436% | 7.186% | 8.836% |
Data Source: Morningstar |
Top performing Direct Plans (Growth Option) on 5-year returns (as on 31st May-24):
Name of Fund | 1-Year Return | 3-Year Return | 5-Year Return |
Kotak Debt Hybrid (G) | 17.011% | 11.697% | 12.767% |
SBI Conservative Hybrid (G) | 14.026% | 10.790% | 11.185% |
HDFC Hybrid Debt Fund (G) | 16.034% | 11.151% | 10.766% |
Category Average | 12.389% | 9.053% | 8.543% |
CRISIL MIF Blended Index PR | 10.436% | 7.186% | 8.836% |
Data Source: Morningstar |
Top performing Direct Plans (Growth Option) on 5-year returns (as on 31st May-24):
Name of Fund | 1-Year Return | 3-Year Return | 5-Year Return |
HDFC BAF (G) | 41.791% | 24.390% | 19.170% |
Baroda BNP Paribas BAF (G) | 26.987% | 15.472% | 16.928% |
Edelweiss BAF (G) | 25.012% | 14.155% | 15.889% |
Category Average | 24.268% | 12.571% | 12.409% |
Benchmark Index | N.A. | N.A. | N.A. |
Data Source: Morningstar |
Top performing Direct Plans (Growth Option) on 5-year returns (as on 31st May-24):
Name of Fund | 1-Year Return | 3-Year Return | 5-Year Return |
Quant Multi-Asset Fund (G) | 52.192% | 26.606% | 30.325% |
ICICI Pru Multi-Asset Fund (G) | 32.489% | 23.459% | 20.255% |
UTI Multi-Asset Fund (G) | 37.765% | 18.444% | 15.529% |
Category Average | 27.294% | 16.135% | 16.427% |
Benchmark Index | N.A. | N.A. | N.A. |
Data Source: Morningstar |
Top performing Direct Plans (Growth Option) on 5-year returns (as on 31st May-24):
Name of Fund | 1-Year Return | 3-Year Return | 5-Year Return |
Tata Equity Arbitrage (G) | 8.417% | 6.321% | 6.099% |
Invesco Arbitrage Fund (G) | 8.490% | 6.612% | 6.047% |
Edelweiss India Arbitrage (G) | 8.510% | 6.475% | 6.044% |
Category Average | 7.805% | 5.713% | 5.778% |
Benchmark Index | N.A. | N.A. | N.A. |
Data Source: Morningstar |
Top performing Direct Plans (Growth Option) on 5-year returns (as on 31st May-24):
Name of Fund | 1-Year Return | 3-Year Return | 5-Year Return |
ICICI Pru Gilt Fund (G) | 8.244% | 6.672% | 8.220% |
SBI Magnum Gilt Fund (G) | 7.630% | 6.554% | 8.173% |
DSP G-Sec Fund (G) | 8.268% | 5.266% | 8.068% |
Category Average | 7.178% | 5.459% | 6.870% |
I-SEC MIBEX Index TR | 6.868% | 5.414% | 7.049% |
Data Source: Morningstar |
Top performing Direct Plans (Growth Option) on 5-year returns (as on 31st May-24):
Name of Fund | 1-Year Return | 3-Year Return | 5-Year Return |
ICICI Pru Corporate Bond (G) | 7.717% | 6.269% | 7.358% |
HSBC Corporate Bond (G) | 6.363% | 5.340% | 7.342% |
ABSL Corporate Bond (G) | 7.595% | 5.925% | 7.332% |
Category Average | 6.827% | 6.808% | 6.491% |
CRISIL ST Bond Fund Index PR | 7.093% | 5.544% | 6.826% |
Data Source: Morningstar |
Top performing Direct Plans (Growth Option) on 5-year returns (as on 31st May-24):
Name of Fund | 1-Year Return | 3-Year Return | 5-Year Return |
ICICI Pru Credit Risk Fund (G) | 8.409% | 7.114% | 8.244% |
DSP Credit Risk Fund (G) | 16.112% | 10.500% | 8.190% |
Baroda BNP Credit Risk Fund (G) | 8.263% | 9.730% | 8.021% |
Category Average | 8.014% | 9.613% | 5.507% |
CRISIL ST Bond Fund Index PR | 7.093% | 5.544% | 6.826% |
Data Source: Morningstar |
Top performing Direct Plans (Growth Option) on 5-year returns (as on 31st May-24):
Name of Fund | 1-Year Return | 3-Year Return | 5-Year Return |
Quant Liquid Plan (G) | 7.186% | 5.810% | 5.763% |
Mahindra Manulife Liquid (G) | 7.398% | 5.785% | 5.356% |
Edelweiss Liquid Fund (G) | 7.418% | 5.764% | 5.354% |
Category Average | 6.334% | 4.969% | 4.731% |
CRISIL Liquid Fund Index PR | 7.327% | 5.811% | 5.445% |
Data Source: Morningstar |
Let us quickly turn to what determined the flows into mutual funds in recent months, and whether these returns were related to the performance of the funds as captured above?
CORRELATION OF FLOWS AND CATEGORY PERFORMANCE
Were the flows in April 2024 related to returns. Of course, the flow figures are with a lag of one month, but the idea would still be there. . We will take the last 1 year AUM change, as captured in the table below, and try to correlate the AUM shift with the returns. Mutual fund AUM rallied sharply in April, due to a mix of strong debt fund flows and equity market appreciation.
Month | Debt AUM
(₹ Trillion) |
Equity AUM
(₹ Trillion) |
Alternate AUM
(₹ Trillion) |
Total AUM
(₹ Trillion) |
Apr-23 | 12.99 | 15.85 | 12.47 | 41.62 |
May-23 | 13.49 | 16.57 | 12.85 | 43.20 |
Jun-23 | 13.48 | 17.43 | 13.22 | 44.39 |
Jul-23 | 14.17 | 18.25 | 13.69 | 46.38 |
Aug-23 | 14.00 | 18.60 | 13.74 | 46.64 |
Sep-23 | 13.05 | 19.08 | 14.17 | 46.58 |
Oct-23 | 13.54 | 18.79 | 14.10 | 46.72 |
Nov-23 | 13.58 | 20.33 | 14.87 | 49.05 |
Dec-23 | 12.91 | 21.79 | 15.78 | 50.78 |
Jan-24 | 13.77 | 22.50 | 16.17 | 52.74 |
Feb-24 | 14.50 | 23.12 | 16.62 | 54.54 |
Mar-24 | 12.62 | 23.49 | 17.02 | 53.40 |
Apr-24 | 14.59 | 24.74 | 17.66 | 57.26 |
Data Source AMFI
As can be seen in the above table, the overall AUM has grown by 37.6% yoy to ₹57.26 Trillion as of the close of April 2024. This has been triggered by 12.3% growth in debt fund AUM, 56.1% growth in equity AUM and 41.6% growth in alternative assets. The enthusiasm of equity flows and hybrid flows are largely borne out by the performance of these funds. In the case of debt funds, most of the swing in flow accretion appears to have come in April, when the liquid flows were reversed.
WHAT WE READ FROM THE MAY 2024 MUTUAL FUND RANKINGS
Here are some key trends we could decipher from the rankings of various categories of mutual funds over different time periods as of end of May 2024.
Amidst the volatility of general elections and geopolitical risk, mutual fund performance has been largely steady in May. The coming months could be interesting!
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