FUND FULCRUM

November 2020

The last quarter was eventful for the mutual fund industry. While the average AUM of the industry is at an all-time high at Rs.28 lakh crore, the mutual fund industry has been witnessing redemptions from equity funds. Overall, the July-September quarter ended on a good note for the industry compared to the April-June quarter in terms of gross redemption. Average AUM of the industry was at Rs.27.74 lakh crore in September 2020 compared to Rs.26.07 lakh crore in June 2020. Overall, redemptions came down from the previous quarter as September 2020 saw redemptions of Rs.7.18 lakh crore compared to Rs.9.54 lakh crore in June 2020.

The industry’s average AUM has reached its peak at Rs.28.34 lakh crore in October 2020 compared to Rs.27.74 lakh crore in September 2020. This is largely due to increasing net inflows in fixed income funds. The mutual fund industry has added 52,674 new investors in October 2020 taking the total count of unique investors to 2.13 crore. The industry’s total number of folios has risen to 9.37 crore in October 2020 from 9.33 crore in September 2020, an increase of 4.12 lakh new folios. Overall, gross redemptions have come down significantly to Rs.5.45 lakh crore in October 2020 from Rs.7.18 lakh crore in September 2020. However, equity funds have witnessed net outflows for four consecutive months. Net outflows in equity funds were Rs.2,700 crore compared to Rs.730 crore in September 2020. On the contrary, debt funds have recorded net inflows of Rs.1.10 lakh crore in October 2020 compared to net outflows of Rs.51,900 crore in September 2020. T30 cities account for Rs.23.54 lakh crore (83%) of industry’s total AUM while B30 cities have AUM of Rs.4.69 lakh crore, which comprises 17% of the total industry AUM. AUM in T30 cities has grown by 5% to Rs.23.54 lakh crore in October 2020 from Rs.22.34 lakh crore in September 2020. Similarly, AUM in B30 cities has risen by 4% to Rs.4.69 lakh crore in October 2020 as against Rs.4.52 lakh crore in September 2020. Folio count in both T30 and B30 cities grew marginally last month. Average AUM per retail folio has increased by 2% to Rs.1.58 lakh in October 2020 from Rs.1.55 lakh in September 2020. Average AUM per folio of retail investors in both B30 and T30 cities has risen by 2% each to Rs.92,700 and Rs.2.06 lakh, respectively.

While the industry has witnessed net inflows of Rs.98,575 crore, equity funds continue to see net outflows for the fourth consecutive month. Due to rise in SIP contribution and net inflows in debt funds, the MF industry’s AUM has reached Rs.28.22 lakh crore as on October 2020, according to the latest AMFI data. Overall, equity schemes have witnessed net outflows of Rs.2,724 crore in October 2020 compared to Rs.734 crore outflow in September 2020. Most outflows in equity funds were due to net outflows from multi cap funds of Rs.1,902 crore followed by Rs.1,201 crore in value funds. Net outflows in multi cap funds were also due to confusion around SEBI’s new norms for multi cap funds. Net outflows were also seen in large cap funds, mid cap funds, small cap funds, dividend yield fund, focused fund and ELSS. Interestingly, the industry has witnessed net inflows in sectoral funds and large and midcap funds. Overall, debt schemes have seen net inflow of Rs.1.10 lakh crore led by liquid funds and short duration funds. Barring credit risk fund and long duration fund, all other debt oriented funds have witnessed robust inflows. Short duration categories such as ultra-short duration, low duration and money market funds have received good traction. Each category has recorded net inflow of over Rs.10,000 crore. Hybrid schemes have witnessed net outflow of Rs.1,600 crore due to  redemptions from balanced advantage funds. While balanced advantage fund has seen a net outflow of Rs.2,300 crore, arbitrage fund saw an inflow  of Rs.1,700 crore. All other hybrid funds like conservative hybrid fund, balanced advantage, multi asset allocation and equity savings have recorded net outflows. SIP folios grew marginally to 3.37 crore in October 2020 from 3.33 crore in September 2020. This led to a rise in monthly SIP contribution to Rs.7,800 crore compared to Rs.7,788 crore in September 2020. All in all, SIP AUM rose to Rs.3.42 lakh crore in October 2020 from Rs.3.35 lakh crore in September 2020. 

HDFC MF, ICICI Prudential MF and SBI MF have emerged as the top three fund houses in terms of equity AAUM in the July-September quarter. Equity AAUM includes pure equity schemes and ELSS. HDFC MF’s equity AAUM for July-September stood at Rs 95,405 crore, ICICI Prudential MF’s at Rs 77, 860 crore and SBI MF’s at Rs 72,545 crore. Next in this list is Axis MF with an equity AAUM of Rs 71,601 crore followed by Aditya Birla Sun Life MF with Rs 66,690 crore equity AAUM. An analysis of top 20 fund houses’ assets shows that there have been a couple of changes in the position of top five players in terms of equity assets this quarter. This includes SBI MF emerging as the third largest player in the equity AAUM league and Axis MF emerging as the fourth largest player. In the January-March quarter of FY2020, HDFC, ICICI Prudential, Aditya Birla Sun Life, SBI and Nippon were the top 5 players in terms of equity AAUM.  In terms of total assets in hybrid funds, ICICI Prudential MF has emerged as the top player. In the January- March quarter, HDFC MF was at the top of the table. The July-September data shows that ICICI Prudential, HDFC, SBI, Kotak and Nippon India MF are now the top 5 fund houses in terms of total AUM in hybrid schemes. 

The latest AMFI data shows that individual investors hold assets of Rs.14 lakh crore as on September 2020, which is 52% of the total MF industry’s AUM. The assets of individual investors have grown by 4% compared to the corresponding period last year. Individual investors include retail investors and HNIs. Meanwhile, institutional investors have seen their assets grow 13% to Rs.13.32 lakh in September 2020 from Rs.11.76 lakh crore in September 2019. Usually, institutional investors hold debt schemes whereas individual investors are more inclined towards equity schemes. Further, data shows that 88% of   assets of equity oriented schemes come from individual investors.  Similarly, institutional players account for majority of the assets of debt oriented schemes (59%), liquid funds (84%), FoFs (91%). Overall, individual investors allocate 68% of their total investment in equity oriented schemes while institutional investors allocate 75% of their assets to liquid and debt oriented schemes.

 

Despite the covid-19 pandemic, the consequent lockdown, a couple of market meltdowns and a sea change in regulations in the recent past, more than 50 lakh news investors have joined the industry since March 2018, nearly 30 months. To put the number in context, the MF industry has a total of 2.13 crore unique investors at the end of September 2020. So, the industry has added nearly 25% of its total investors in the last 30 months. The MF industry is likely to reach 4 crore unique investors very soon in the near-term.

Piquant Parade

The number of individuals and distribution firms applying for RIA license with SEBI has gone up substantially over the last three months. SEBI data shows that 44 individuals and entities have approached SEBI to seek RIA license during July-September this year as against 38 applications in the entire year last financial year. In fact, as many as 20 individuals and entities have approached SEBI to register as RIA in September 2020.

 

To be continued…