Mutual fund AUM at 11-month low despite strong inflows; fund managers hike auto, oil, gas weightage

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With the consecutive months of negative returns on Dalal Street, the Asset Under Management for the mutual fund industry dropped to an 11-month low in June, data sourced by Motilal Oswal showed. “Total AUM for the mutual fund (MF) industry declined for the second consecutive month to Rs 35.6 trillion (-4.2% MoM) in June 2022 — the lowest level since August 2021 — led by a decline in AUM for income (Rs 711 billion), equities (Rs 405 billion), liquid (Rs 219 billion), other ETFs (Rs 115 billion,” the report said. While the AUM has come down, inflows into mutual funds remain strong with continued SIP flows and lower redemptions. 

AUM falls but SIP inflows remain steady

Data showed that equity AUM for domestic MFs, including ELSS and index funds, decreased 2.9% sequentially to Rs 13.8 trillion in June. “This was due to a decline in equity scheme sales (down 7.6% MoM to Rs 355 billion). Further, market indices closed lower,” analysts at Motilal Oswal wrote. The Nifty 50 index was down 4.8% in June, after having registered a 3% decline in May. This was the third consecutive month where the Nifty 50 registered a fall. The headline index reported the steepest one-month decline since March 2020.

While AUM for mutual funds dipped, redemptions were down 15.4% sequentially to Rs 127 billion — at a 25-month low. Net inflows declined marginally to Rs 228 billion in June 2022, from Rs 234 billion in May. This was anchored by SIP contributions which remain strong with the tenth straight month of more than Rs 100 billion investment. SIP inflows were at Rs 122.8 billion. 

Sectoral weightage changes

Sectorally, fund managers showed an interest in automobiles, oil & gas, consumer, healthcare, telecom, and PSU banks leading to an increase in their weights on a month-on-month basis. Auto sector weightage was up 0.5% as the value of the sector increased 4%. Oil and gas sector’s weight increased by 0.2% while the value of the sector slipped by 1.1%. Consumer, healthcare, PSU Bank, and telecom sector weightage were increased by 0.1% each. Among these only, the telecom sector saw a growth in value by 0.7% while others reported a decline. 

On the other hand, private banks, metals, NBFCs, cement, retail, utilities, textiles, insurance, and chemicals saw on-month moderation in weights. Private banks’ weightage was down 0.4% while their value dropped 5.7% in June. Metals weight was down 0.3% after a whopping 14.7% decline in value. 

Overall, fund managers have the highest weightage attributed to private lenders at 17.5%, followed by 11.5% for technology stocks, 7.6% for automobiles, and 7.3% for NBFCs. 

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