Mutual fund investors show faith in Indian equity market

The month of February 2018 remains one of the most volatile month for equity returns since November 2016, besides witnessing a sharp fall in the equity indices. Major equity indices fell by more than 5%. The spillover of this is being directly reflected in mutual fund activities.

Equity asset under management (AUM) that has been witnessing a continuous rise for more than a year saw a pause in the month of February 2018. Equity AUM for industry fell by 1.3 per cent on monthly basis. The reason for such decline was fall in the share prices. Other than IT index, all other sectoral and broader stock indices fell in the range of 1.2 to 16.7 per cent. This led to such drop in the AUM.

Nevertheless, what saved the day for equity AUM was lower redemptions. Despite market giving negative returns, investors showed faith in the market and monthly redemptions fell by as much as 42.3 per cent to Rs. 18,400 crore. Compare to this, the inflows fell by 26.7 per cent to Rs. 34,600 crore in the same duration. This resulted into an overall net inflow of Rs. 16,300 crore in the month of February 2018, which is an increase of 5.7 per cent on monthly basis.

There has also been some significant change in the sector and stock allocation of funds. On a month on month basis, the weight of IT companies, Metals, Retail and Healthcare increased. The sectors whose allocations reduced included banks (also private banks) and capital goods. The sector allocation also got reflected in stocks where maximum buying took place. Infosys remained the most favoured stock in terms of buying while ICICI Bank witnessed a maximum decline in terms of value.