Mutual funds recorded Rs 7,600 crore net inflows into active equity schemes in July even as redemptions surged to a 30-month high of Rs 30,400 crore owing to profit booking, reveals data from the Association of Mutual Funds in India (Amfi). Equity net inflows were 13 per cent lower compared to the preceding month's tally. The inflows were supported by a strong flow from retail investors through the systematic investment plan (SIP) route.
Companies, which missed out on listing earlier, are giving it another shot but with significantly-reduced issue sizes. In the recent past, companies such as TVS Supply Chain Solutions, Suraj Estate Developers, and ESAF Small Finance Bank have re-filed their draft red herring prospectuses (DRHPs) with the Securities and Exchange Board of India (Sebi). This came after they slashed their issue sizes by 20-60 per cent.
Even as the returns of mutual fund (MF) schemes have improved considerably in the past three months, addition of new investors has remained in the slow lane for the MF industry. According to industry data, during the first six months of CY 2023, MFs onboarded only 1.6 million new unique investors, in stark contrast to the 4.7 million investors added during the same period last CY and the 2.4 million in 2021. It is noteworthy, however, that the current additions for this year have doubled in comparison to the figure of 800,000 seen in 2020.
'Especially if their investment horizon is over two years.'
Jio Financial Services, a unit of Mukesh Ambani's Reliance Industries (RIL), got valued at Rs 1.66 trillion ($20 billion) following an hour-long special trading session conducted by stock exchanges on Thursday. Shares of RIL's unit got priced at Rs 261.85 apiece - higher than analysts' expectations of Rs 134-224 per share. The price was arrived at after calculating the difference between RIL's Wednesday (July 19) close of Rs 2,840 and Rs 2,580, the price discovered during the first-of-its-kind pre-trade session.
Mutual funds (MFs) are betting on a turnaround in the healthcare sector to boost returns but are divided on the prospects of the information technology (IT) sector amid uncertain growth outlook. At the end of June, all of the top 20 fund houses were overweight on the healthcare sector vis--vis the sector's presence in the BSE 200 index, shows a report by Motilal Oswal Financial Services (MOFS). In the case of the IT sector, only six of the 20 fund houses had overweight positions.
Following a more than 15 per cent surge in the National Stock Exchange (NSE) Nifty 50 from this year's lows, the spread between the 10-year government security (G-sec) and the Nifty earnings has approached the danger zone of 2 percentage points (ppt). At present, the G-sec yield is roughly 7.09 per cent, while the Nifty earnings are 5.12 per cent. As a result, the spread works out to 1.98 ppt, ever so slightly below the danger mark of 2 ppt.
Actively-managed large-cap mutual fund (MF) schemes have managed to regain some lost sheen this year after faring poorly in the 2022 calendar year (CY22). At the end of the first six months (H1) of CY23, 78 per cent of the active large-cap schemes were ahead of the Nifty50 index funds as against just 26 per cent in 2022. When compared to the Sensex index funds, 61 per cent active funds have delivered better returns, shows an analysis of Value Research data.
The top three mutual funds (MFs) paid out 10-18 per cent higher commissions to distributors during the financial year 2022-23 (FY23) compared to FY22 as a sustained rise in flows from the systematic investment plan (SIP) route boosted distributors' share in the assets under management (AUM), according to an analysis of the disclosures by the top three fund houses. State Bank of India (SBI) MF saw its commission payout go up 18 per cent year-on-year (YoY) to Rs 1,675 crore. The payouts rose 10 per cent and 15 per cent for ICICI Prudential MF and HDFC MF, respectively.
Foreign portfolio investors (FPIs) are likely to get a reprieve from the Securities and Exchange Board of India (Sebi) in case of a passive or unintended breach of the thresholds that trigger additional disclosure norms. According to sources, FPIs whose single group exposure exceeds 50 per cent of their corpus will get 10 trading days to bring down their exposure below the prescribed level, without triggering the stricter disclosure norms. If total equity exposure of an overseas fund exceeds Rs 25,000 crore and it doesn't wish to provide additional disclosures, it will have three months to pare its exposure.
The Covid winter seems to be finally ending for debt-oriented mutual fund (MF) schemes as interest rates peak, especially for those that invest in shorter-maturity papers. In the past two months, shorter-horizon debt schemes - ultra-short, low-duration, and money-market - have together raked in net inflows of Rs 48,000 crore, the highest for two months since April-May 2021. These schemes invest in shorter-maturity papers ranging from three months to a year.
Investor confidence in unlisted shares was shaken after recent developments that saw online drugstore PharmEasy issuing new shares in a rights issue at a 90 per cent discount to its previous valuations and Reliance Retail's move to buy back and cancel shares held by public investors. Both stocks were, at one time, very popular in the unlisted market, with canny investors cornering them with the objective of benefiting from their listing. "Since investors have suffered losses on both counts, they will be careful when it comes to dealing in shares of unlisted companies," observes a broker dealing in unlisted shares, adding that there will be some rationality to the pricing.
Shrinking inflows and surging outflows on account of profit-booking has curtailed mutual fund (MF) investments in equities since April. The total investments made by equity MFs during the first three months of 2023-24 stands at just Rs 2,980 crore, compared with an average monthly investment of Rs 14,500 crore in 2022-23, reveals data from the Securities and Exchange Board of India. "We are seeing signs of moderation in non-systematic investment plan (SIP) contribution, which has impacted domestic fund inflows in recent months to some extent," says Kunal Vora, head-India equity research, BNP Paribas.
With Housing Development Finance Corporation's (HDFC's) merger with HDFC Bank becoming effective on July 1, the merged entity is set to become the top weight in the benchmarks S&P BSE Sensex and the National Stock Exchange Nifty indices, dislodging the country's most valuable company, Reliance Industries (RIL), from its perch. HDFC will stop trading after July 13. At present, RIL has a weighting of close to 12 per cent in the Sensex and 10.3 per cent in the broad-based Nifty. Meanwhile, HDFC Bank and HDFC have weights of 9.9 per cent and 6.8 per cent in the Sensex and 8.8 per cent and 6 per cent in the Nifty, respectively.
The US market has been a standout performer this year, with the benchmark Standard and Poor's 500 (or simply the S&P 500) gaining over 16 per cent during the first half of calendar year 2023 (CY23) in what was its best first-half show since 2019. By comparison, India's National Stock Exchange Nifty 500 has gained 6.4 per cent. On the surface, it appears that the US markets have done exceedingly well. However, a deeper analysis reveals the gains in the domestic market to be more well-spread.
After pulling out $17 billion in calendar year 2022, foreign portfolio investors (FPIs) have pumped $7.3 billion back into equity markets so far this year. The turnaround in foreign flows has helped domestic markets exceed the all-time highs chalked up in December 2022 and bounced back more than 10 per cent from this year's lows. However, a big nugget of FPI inflows seen this year could be off the back of two factors: exchange-traded funds (ETFs) and block deals.
Gift Nifty will provide Indian investors cues on how domestic markets could react to global events.
Retail investors now own a bigger slice of small-cap companies than a couple of years earlier, attributable to their growing conviction in mutual fund (MF) schemes focused on this space. Data from Capitaline shows MFs' average holding in the National Stock Exchange Nifty Smallcap 250 rising to 8.67 per cent, from 7.67 per cent in the past two financial years, with the number of companies with over 20 per cent MF holdings, rising from 15 to 24. At the end of May, the top five small-cap firms with the highest MF holdings were Carborundum Universal, Blue Star, Cyient, Gujarat State Petronet, and Cholamandalam Finance.
The impending merger between Housing Development Finance Corporation (HDFC) with HDFC Bank may create challenges for large-cap fund managers, most of whom are already grappling to match the returns generated by their benchmarks. The combined weight following the merger in the benchmark Sensex and Nifty 50 indices is likely to be much higher than permissible limits for active mutual fund (MF) schemes. This could have a bearing on the performance of large-cap funds if HDFC Bank shares outperform the markets, as the schemes will be forced to remain underweight on the stock to adhere to the single-stock cap.
Two equity funds at the opposite ends of the risk matrix - small-cap and arbitrage - bucked the 'low inflow' trend in May this calendar year 2023 (CY23) to receive the highest net inflows in recent years. The Rs 3,280-crore net inflows into small-cap schemes in May was the highest for the category since the mutual fund (MF) industry started releasing fund-wise inflow data in April 2019. Arbitrage schemes raked in a net Rs 6,640 crore - the highest since July 2021.
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