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Mutual funds seem to have preferred investing in non-cyclical sectors in 2021-22 as the market continued to hit new highs. Flexi-cap funds witnessed large inflows following the realignment of multi-cap funds and launch of new flexi-cap funds.
Banking, software, finance, consumer durables and retail were the top five sectors that witnessed the highest growth in equity mutual fund assets on a year-on-year basis, as of September 2021.
Assets under management (AUM) of equity mutual funds in the banking sector surged over 80 per cent to ₹3.76 lakh crore, against ₹2.09 lakh crore in the same quarter a year ago. The share of the banking sector in the total equity assets went up to 19.76 per cent from 17.91 per cent during this period.
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It is to be noted that AUM growth is a result of both fresh deployment of funds as well as an increase in the valuation of the underlying stocks in the portfolio.
Equity AUM in the software sector went up to ₹2.28 lakh crore at the end of the second quarter of the current fiscal, from ₹1.37 lakh crore in the same quarter last year. Equity assets in the finance sector grew by 38 per cent to ₹1.47 lakh crore at the end of September 2021.
The consumer durables and retailing sectors witnessed the sharpest increase in equity mutual fund assets between September 2020 and 2021. While assets in the consumer durables sector grew nearly 80 per cent, the retailing sector saw its assets grow by 181 per cent to ₹41,089 crore as of September 2021. The ‘others’ category also saw a sharp increase in AUM to ₹1.47 lakh crore, as of September 2021, from ₹16,797 crore in the previous-year quarter.
Equity inflows
Open-end equity mutual funds saw a 10-quarter high inflow of ₹39,928 crore in Q2FY22. The category witnessed seven consecutive months of net inflows (between March 2021 and September 2021) after the net outflows during the preceding eight months (July 2020 to February 2021).
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The total AUM of open-end equity funds, as of September 2021, stood at ₹12.79 lakh crore, growing by 67 per cent over the ₹7.64 lakh crore recorded in the same quarter a year ago.
“One of the major reasons for the big jump in total assets over the last year could be the strong market performance across market caps. Open-end equity funds form approximately 35.5 per cent of the total open-end fund universe, up from 34 per cent in the previous quarter,” research firm Morningstar India said in its latest domestic funds flow report.
Flexi-cap funds
Of the total open-ended equity mutual fund AUM of ₹12.79 lakh crore, large-cap funds and flexi-cap funds accounted for 17 per cent each, followed by equity-linked savings schemes and mid-cap funds with 12 per cent each. Equity assets under the multi-cap fund dropped from ₹1.44 lakh crore in September 2020 to ₹31,442 crore in September 2021. However, the drop in AUM under this category was on account of portfolio realignment post the creation of a new flexi-cap category by SEBI in November 2020.
“Many AMCs that realigned their existing funds into the flexi-cap category have gone on to launch multi-cap funds, while AMCs that retained their funds in the multi-cap category have launched flexi-cap funds. The flexi-cap category has now amassed assets of ₹2.15 lakh crore via realignment of funds and new fund launches. Its assets are only a shade behind large-cap’s assets, which are ₹2.18 lakh crore,” Moringstar said.
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