Inflows into equity mutual funds surged more than two-fold in June, driven by investments into small-cap schemes. Net investments into actively managed equity schemes stood at Rs 8,638 crore in June, a jump of 167% from a month earlier, according to data released by the Association of Mutual Funds in India.
Business Standard, 10th July 2023
With the benchmark indices ruling at lifetime highs, the microcaps space remains the last bastion of relatively cheap valuations, according to analysts at ICICI Securities.
While the Nifty 50 is up 14 per cent from March 2023 lows, the stocks that have outperformed belong to cyclical and growth sectors such as real estate, industrials, banks (PSU and small), NBFCs, insurance, AMCs, auto and internet.
The most recent market rally since March 2023 lows has been broad-based with 30 stocks accounting for more than 75% of the index performance and 48 stocks outperforming the benchmark index by >200bps within the NSE 100 index.
Note: Returns have been computed considering closing price on 24th Mar’23 and 5th July’23
“We continue to prefer beneficiaries of the investment and credit cycle in the economy along with high-end discretionary consumption (banks, capital goods, utilities, telecom, real estate, building material and discretionary consumption),” said Vinod Karki, research analyst at ICICI Securities.
“Currently, the equity market is at a record-high level. Metal and technology stocks are among the best performers on the BSE. Long term perspective, Indian equities will stand strong as the rate hike cycle in the USA will reverse by the end of next year and more inflow of FII buying will result in strong consolidation of Indian indices on higher levels. Reliance Industries, Tata Consultancy Services (TCS), Infosys, HDFC Bank are the best stocks to bet on,” said Jayden Ong, Senior Market Analyst, APAC, Vantage.
Inflows into open-ended equity mutual funds (MFs) jumped 166 percent to Rs 8,637 crore in June amid a steady rise in the stock markets, showed data from Association of Mutual Funds in India (AMFI). Smallcap funds continued to be in demand as net inflows surged 66 percent month-on-month to Rs 5,471.75 crore in June.
FPI inflows largely into financials , discretionary consumption and industrials while IT space continues to see outflows
Mutual funds are net sellers in banks, staples, etc. while largely being buyers in financial services, IT and consumer discretionary
Source: ACEMF, I-Sec research
Note: MF sectoral flows are based on change in number of shares compiled using ACE MF, and average closing prices during the period. MF flows are active flows only.
- Mutual Fund Folios reached an all-time high of 14,91,31,708 in the month of June 2023 compared to 14,73,75,502 for May 2023 .
- Retail MF Folios (Equity + Hybrid + Solution Oriented Schemes) also at an all-time high at 11,90,63,434 in June 2023 compared to 11,76,37,747 in May 2023.
- Retail AUM (Equity + Hybrid + Solution Oriented Schemes) stood at Rs 23,09,169 crore for June 2023, with an Average AUM of Rs 22,73,720 crore
- A total of 11 schemes were launched in June, all in open ended category, raising a total of Rs 3228 crore.
- SIP contribution stood at Rs 14,734.45 crore in June 2023
- The number of SIP accounts stood at highest ever 6,65,37,033 for June 2023 compared to 6,52,84,902 in May 2023
- The SIP AUM stood at Rs 7,93,608.79 for June 2023, compared to Rs 7,52,943.79 crore for May 2023.
- Number of new SIPs registered in June 2023 were 27,78,507, highest till date
“Nifty has given more than 10% return in FY24 year to date led by resilient domestic demand and $14 billion of net FII flows. India continues to be epitome of global growth with 6.5%+ expected GDP growth for FY24 (highest globally) even as growth is slowing down in US and Europe is embracing recession. India has witnessed revival in FII inflows (Strong global markets) and we expect the same to sustain post $23 billion outflow in last two years and decline in FII ownership by 300bps to 20.3%. Given strong domestic growth, declining inflation (Food and Fuel), revival in industrial capex and strong Infra push by GOI and demographic dividend, we expect sustained traction in FII inflows to continue,” said Amnish Agarwal, analyst at Prabhudas Liladher.
The brokerage is overweight on Auto, Banks, IT services, capital Goods and Healthcare. It is Underweight on Metals, Cement, Consumer, Oil & Gas and Diversified Financials. “
Indian equity markets appear to have a short-lived memory – the scathing short seller report directly against a large Indian conglomerate (in Jan-23) and indirectly against India Inc. – seems squarely in the rear-view mirror as India’s flagship equity index nears all-time highs. Capex boost and strong macro high- speed indicators paint an optimistic case for India’s weight increase in MSCI indices… Within equities, we remain neutral between large and mid-caps,” said LGT Wealth India.
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