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India’s top performing mutual fund schemes in October 2024

4 Nov 2024 , 01:04 PM

OCTOBER 2024 SAW RECORD FPI SELLING IN EQUITIES

The Indian markets went into the month of October with 4 major apprehensions. The first apprehension was that, despite the Fed cutting rates by 50 bps in September 2024, the RBI may not really budget at this point of time. That was proven correct as the RBI MPC opted to maintain status quo in the October policy statement. The second apprehension pertained to the quarterly results. There were concerns that margins may come under pressure. However, it proved to be double whammy based on the initial results announced. Not only did the operating profit margins come under pressure, but urban consumption took a hit, even as rural demand showed some green shoots of recovery. The third apprehension pertained to the demand during the festive season. While there has been some impact, it has been more of a demand pattern shift from stores, malls, and shopping centres to online shopping. Even gold demand has picked up after a slow start. The last concern was that FPIs may tilt towards the selling side due to other markets in Asia being attractive. However, that was an understatement. FPIs were net sellers of $13.56 Billion in secondary market equities in October, proving to be the worst month in Indian FPI history. IPOs offered some respite.

With the RBI not giving any indication of when it plans to cut repo rates, the markets got further spooked in the month of October. It must be said that the domestic institutions infused an amount equivalent to the FPI selling, but that did not help the market sentiments too much. For the month of October as a whole, the total equity selling by FPIs was to the tune of $11.20 Billion. This can be further broken up into IPO inflows of $2.36 Billion and secondary market FPI outflows of $13.56 Billion. Even the IPO inflows was largely explained by the Hyundai Motor India IPO, which saw heavy subscription from the FPIs. If you look at the stock market performance for the month of October 2024; then the Sensex fell (-5.83%), Nifty closed with losses of (-6.22)%, and Nifty Next 50 losing (-9.32)%. The mid-cap index fell by (-6.72)% and while the small cap index closed (-3.01)% lower in October 2024. The selling appeared to be across the board with large caps and mid-cap stocks taking it on the chin.

BENCHMARK BOND YIELDS HARDEN IN OCTOBER 2024

For October 2024, India 10-year bond yields opened at 6.732% and closed sharply higher at 6.954%. The reasons for the spike in bond yields were broadly four-fold. Firstly, it is apparent that the RBI would be a lot more calibrated in its rate cuts compared to the Fed, at least for now. The RBI governor has said that in as many words. Second, the consumer inflation spiked to 5.49% in September on the back of a spike in food inflation. Despite an above-normal monsoon and robust Kharif output expected, food inflation could pose a challenge. Thirdly, the unrest in West Asia is not only putting oil at risk, but it is raising the freight and insurance premium and exposing India to risk of imported inflation. The last factor responsible for the sharp spike in bond yields was purely technical. Several bond trades had strategically purchased long-duration bonds on expectations of rate cuts by the RBI. With rate cuts looking unlikely before February 2025, many of these traders are dumping these bonds, resulting in a fall in bond prices and a spike in bond yields.

Here is a quick dekko at how various mutual fund categories performed in October 2024.

Equity Large-Cap Funds