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Mutual Fund Newsletter – September 2020

As part of our consistent efforts to create and nurture each Indian into becoming an informed investor and support their investment journey, we bring you another new feature – Indian Mutual Funds: The Month That Was – a monthly newsletter. This newsletter aims at providing updates on the changes in the mutual fund universe, Asset Management Companies (AMCs), their assets under management (AUM), schemes, ratios and their respective performances over various time periods.

Understanding recent regulatory changes that have been implemented is necessary to set the tone of information and insights to follow on in the upcoming sections. Securities Exchange Board of India (SEBI) has, vide its circular no. SEBI/HO/IMD/DF3/CIR/P/2017/114 dated 6th October 2017, defined large cap, mid cap and small cap companies in order to ensure uniformity in respect of the investment universe for mutual fund schemes. This regulation termed as the SEBI Categorization and Rationalization of Mutual Fund Schemes helped in reduction of schemes from thousands to hundreds, thereby easing the selection process for every investor.

The Schemes would be broadly classified in the following groups:

  • Equity Schemes
  • Debt Schemes
  • Hybrid Schemes
  • Solution Oriented Schemes
  • Other Schemes

As per the monthly data from Association of Mutual Funds of India (AMFI), there are specific categories for scheme offerings: 16 categories under debt, 10 under equity, 6 under hybrid, 2 under solution oriented and 4 categories of other schemes (Index funds, Gold ETFs, Other ETFs, and Fund of Funds investing Overseas). These account for open ended categories of schemes.

Similarly, under close ended schemes, there are three categories; income or debt-oriented schemes (4 sub categories), growth or equity-oriented schemes (2 sub categories), and other schemes. Due to these investor friendly changes, each AMC is restricted from offering new schemes in the same category, thereby offering focused options to investors.

Further, SEBI also stipulated that AMFI shall prepare the list of stocks for categorization as large cap, mid cap and small cap. Hence, every six months, AMFI releases the list of stocks, based on market capitalization, for the benefit of fund managers to incorporate necessary changes.

With this background, let us dive into the details, to keep you up to date on the mutual funds (MFs), and help you make the right choice in selecting the right AMCs and suitable schemes for investing.

There are 42 active AMCs operating in India as of 30th September 2020. The AMCs and their AUMs are:

However, only 21 AMCs account for most of the assets under management in the mutual fund industry.

Monthly data released by AMFI indicates that Average Assets Under Management (AUM) for September remained unchanged at Rs.27.74 lakh crore vs. Rs27.78 lakh crore in Aug 2020. Net flows for the month stood at Rs. (-)52,091 crore in comparison to only Rs. (-) 14,553 crore in the previous month.

Let us examine each of the sub categories mentioned in the above table. As usual, September saw an out flow of ~66,000 crore from liquid funds, due to advanced tax payments and other expense requirements.

Equity schemes continue to witness outflows for the 6th month in a row. The recent SEBI circular on multi-cap funds seem to have an effect, resulting in outflows of ~1,144 crore. This circular on asset allocation of multi cap funds was necessary, so as to keep the scheme objective true to its name and nature, thereby broadening the scope of investments across listed stocks. Similar was the situation with large cap and value funds. Inflows into large and midcap funds as well as focused funds was appreciable, thereby ending the equity fund segment flows at (-)734 crore for the month, much better than the outflows seen in August 2020.

In the hybrid category, outflows continue unabated. Investors shunned balanced funds and moved into riskier segments, resulting in outflow of almost 4,220 crore. In calendar year 2020, hybrid funds saw net outflows amounting to 40,333 crore, with balanced and aggressive hybrid fund net outflows at 14,048 crore and arbitrage fund net out flows at 19,525 crore.

The fourth category, i.e solution-oriented schemes had some net flows in to the children’s funds but otherwise not a substantial category for flows in the overall scheme of things.

The category which saw the highest inflows was the ETFs – gold as well as other ETFs. With an inflow of almost 4,100 crore into these schemes, accompanied by overseas Fund of Funds (FoF) at 1,520 crore, investors have opted to participate in direct equities through the ETF route.

All these schemes accounted for the open-ended category and the net sum of all flows into these 981 schemes was (-)50,813 crore.

The closed ended schemes which account for 749 schemes saw outflows of 1,271 crore, mainly due to maturity of fixed term plans and capital protection-oriented schemes. These two segments alone accounted for the bulk of the outflows.

With 6 million new demat accounts opened in the last 9 months, investors took interest in direct equities, owing to availability of time. A portion of mutual fund investments was re-routed into direct equities, owing to relatively poor performance of some MF schemes. Share of retail + HNI participation as a percentage has increased from 70.80 in March, 2020 to 85 by August, 2020. This is a significant rise and can explain all the indicators – higher demat account opening, slowing down of mutual fund SIPs under some categories and higher retail participation in direct equities – together. However, as a long-term wealth building mechanism, SIPs in mutual funds are still sought out by passive as well as active investors.

The SIP inflow has been flat on a month on month basis. This coincides with the onset of lockdowns owing to the corona virus pandemic as well as the stock market crash in the month of March. As work from home became the new normal, investors in general, who rarely had the time for active investing, started doing so.

Indian mutual funds currently have about 3.34 crore (33.4 million) SIP accounts through which investors regularly invest in Indian mutual fund schemes. The new SIP additions have been steady at around 10.5 lakh on an average while the number of SIPs discontinued due to maturity & stoppage stand at an average of 7.15 lakh.

While this information covers generic insights, FYERS Research team worked towards providing specific insights to help investors to invest better, not only in MFs but also in direct equities.

Given below are the Top 30 stocks and the number of schemes holding each stock, with scheme holdings at various percentage levels.

Every month, there would be many schemes increasing their exposure to existing stocks. Top 30 stocks where mutual funds increased their exposure in the last month stand as follows:

Similarly, top 30 stocks where mutual funds decreased their exposure in the last month stand as follows:

There are many insights that can be drawn from the data &analysis. FYERS Direct team continues to constantly research indirect equities and mutual funds, to bring you the best of information and insights, to convert them into actionable items, supporting your investments. All through the month, FYERS research team will share information that clients can benefit from, at our twitter handle and by the 15th of every month, the newsletter will be made available on our website.

A excel workbook will be made available to all readers, highlighting all the schemes across equity, debt, hybrid, index and ETFs, their NAVs, minimum investment amounts, AUMs, expense ratios, exit loads, risk ratios as well as returns – absolute, annualized and calendar returns.

 

Mutual Funds Summary & Performance

Hope investors make the best use of the data, analysis and insights at hand, to further their journey of investment building with FYERS Direct Mutual Funds.

Stay Safe and Happy Investing!

Gopal Kavalireddi

Gopal Kavalireddi

A data maverick on the loose! 24/7 research, analyzing the stock market upside down and from the inside out. His vast educational accomplishments and 2 decades of in-depth experience from the corporate world helps to join the dots when it comes to investing in stocks. You can expect well-researched themes/portfolios, not stock tips!

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