NEW DELHI: Mutual fund investors, especially stock market debutants, have become very aggressive. Despite a sharp slowdown in economic activity across the globe, mutual funds have made a net investment of Rs 39,498 crore in stocks in the first six months of 2020, more than four-times (Rs 8,735 crore) the amount infused a year ago. Of this, over Rs 30,000 crore was invested in March alone, latest data available with Sebi showed. The healthy flow into equity-oriented mutual funds comes even as the pandemic has decimated revenues across sectors.
Fund managers say that this only displays a more mature investor behaviour wherein participants are viewing market corrections as an opportunity rather than a threat. “The sharp sell-off in the equity market by foreign investors led to cheaper valuations driving domestic mutual funds to do value buying,” according to Bajaj Capital. The four-fold higher inflow in the first half of 2020 can be explained by the rising popularity of asset allocation funds, which in turn used them to pick up stocks at attractive valuations after the steep fall in March.
MFs invested a net Rs 1,384 crore in equities in January this year, Rs 9,863 crore in February, and a staggering Rs 30,285 crore in March. While they pulled out Rs 7,965 crore in April, the trend reversed in May investing Rs 6,522 crore. In June, flows have reversed again, with an outflow of Rs 612 crore, the data showed.
Dynamic asset allocation funds, a category with a cumulative AUM of Rs 98,000 crore as of February, and carrying net equity exposure of 40-45 per cent on average, had increased their equity allocation to about 60 per cent by March-end, capitalising on the attractive valuations. They have maintained net equity exposure of 55-60 per cent since then.
Even the aggressive hybrid mutual funds had increased equity allocation in March, Bajaj Capital noted.
However, funds struggled to grow assets under management (AUM). Mutual funds’ asset base dropped eight per cent in the quarter ended June. Average industry AUM of 45 players, stood at Rs 24.82 lakh crore in April-June period as compared to Rs 27 lakh crore in the preceding quarter.
Capital inflow
Rs 39.5 thousand crore invested in the markets by mutual funds in H1 2020
Rs 30.3 thousand crore invested in the markets by MFs in March 2020 alone
Dynamic asset allocation funds had increased equity allocations to 60 per cent by March-end