Mutual funds continued to be net sellers

In the month of September 2012, domestic mutual funds continued to be net sellers in the Indian equity markets. They net sold to the tune of 3,008 crore thereby nearly doubling from their August 2012's net selling activity (where they net sold to the tune of Rs 1,543 crore). Although, the Government did bring in slew of reform measures as mentioned above, fund managers seemed to be cautious about the valuations of the Indian equity markets and the quick run-up which occurred. Also the political uncertainty prevailing due to some opposition parties not being comfortable with the measures adopted by the Government, refrained them from being net buyers in the Indian equity markets.

BSE Sensex vs. MF inflows

 

 

 

 

 

 

As far as the performance of various categories of mutual funds is concerned, luring returns were generated for investors with the upward movement of the Indian equity markets. In the diversified equity fund category, gains were seen across market capitalisation and styles of investing. Thus even the ELSS funds which adopt a fluid style of investing, also did well in the month gone by.

Among the sector funds, infrastructure, banking & financial services and few of those following progressive themes delivered stunning returns as the underlying reform story aided their wealth creation path. But with the period of "risk-on" being reinstated, the defensive ones such as pharma and FMCG funds took a backseat by delivered petite returns.  

In the Fund of Fund (FoF) schemes, the domestic equity funds and the offshore ones focusing on gold mining delivered luring returns as investors preferred to flock to equity and gold as an asset class in the period of "risk-on".
 
Speaking about the hybrid funds; the balanced funds reported striking gains in the month gone by well supported by the upside movement in the equity markets and drop in yields in the bond markets, which benefited their debt portfolio. Likewise gains were seen in Monthly Income Plans (MIPs) category, aided by drop in yields of debt papers across maturity due to sufficient liquidity in the system and focus on fiscal consolidation on the part of  the Government.

The debt mutual funds, across categories and tenure also showed a decent performance in the month gone by, as yields across maturities of mellowed down due to sufficient liquidity in the system and measures taken by the Government on the path of fiscal consolidation. But income funds and gilt funds did well in the debt mutual fund category, as signs of policy rates mellowing down gradually (from the near the peak levels) appeared.

It is noteworthy that both FIIs and domestic mutual funds continued to be net buyers in the Indian debt market, as they both net bought to the tune of Rs 623 crore and Rs 48,693 crore respectively (as against Rs 265 crore and Rs 27,004 crore in the month of August 2012).

Thus in the last quarter (i.e. July 2012 to September 2012) the Indian mutual fund industry also registered a growth of 7.9% in the Average Assets Under Management (AAUM); with the value of AAUM standing at Rs 7.47 lakh crore (as against Rs 6.93 lakh crore in quarter from April 2012 to June 2012).

Performance across various categories of mutual funds

 

 

 

 

 

The graph above depicts how various categories of mutual funds performed in the previous month. Amongst the sector and thematic funds, banking and infrastructure funds took the lead, while defensive ones such as pharma and FMCG took a backseat and delivered petite returns due to the period of "risk-on" being reinstated. Tech funds too lost the steam due to gains in the Indian rupee; which led to their underlying stocks grieve - especially those companies having an export oriented nature of business. Among the diversified equity funds, gains were seen across market capitalisation, but the funds following a value style of investing performed a tad better.

Tracing with upward movement of prices of precious yellow metal - gold, Gold ETFs too exhibited positive returns for investors (gaining by an average of +1.6%). Likewise debt mutual funds across categories too gained with softening in yields of across maturities of debt papers.

PersonalFN is a Mumbai based Financial Planning and Mutual Fund Research Firm