MF inflows into equity oriented funds, which raised a bit of worries in July-August due to downtrend, doubled in September to Rs 14,100 crore from Rs 6,800 crore in previous month.
September 2018 was one of the worst months investors witnessed as benchmark indices fell more than 6 percent and broader markets corrected 12-16 percent. The brutal sell-off started immediately after the frontline indices hit record highs on August 28 and since then both Sensex and Nifty plunged more than 12 percent.
The sharp fall in Indian rupee along with emerging markets currencies, upmove move in crude oil prices, trade war tensions, crack in NBFCs and financials on IL&FS-led liquidity fears and surprise RBI repo rate pause are among key reasons for bears to take charge on Dalal Street.
FIIs turned net sellers in September to the tune of Rs 9,600 crore, taking their total outflow to Rs 29,000 crore since August. But this panic selling turned into the opportunity for many investors who believe in India's fundamentals and improving corporate earnings.
Among them were domestic institutional investors, including mutual funds who have been net buyers since August 2016 in equity markets.
MF inflows into equity oriented funds, which raised a bit of worries in July-August due to downtrend, doubled in September to Rs 14,100 crore from Rs 6,800 crore in previous month. In fact, the flow was at three-month high, though the equity asset under management (AUM) declined marginally during the month to Rs 10.16 lakh crore due to fall in equity markets.
Even the flow from systematic investment plan (SIP) into equity, which has been strong for past many months, increased to Rs 7,727 crore in September.
"MF industry assets de-grew to Rs 22 lakh crore, on the back of volatile markets in September and large outflows from liquid funds," ICICI Securities said.
Equity-oriented funds constitute 46 percent, debt funds constitute 33 percent and liquid funds 18 percent of the total assets. Debt and liquid funds predominantly have institutional investors, while equity oriented funds predominantly have individual investors.
Among largecaps, mutual funds made highest buying in Vedanta, NMDC, Adani Ports, Asian Paints and Ashok Leyland during September, ICICI Securities said, adding stocks which saw highest selling by AMCs were Shriram Transport Finance, Wipro, ICICI Lombard, United Breweries and L&T Finance Holdings.
The research house further said, "In midcaps, stocks like Adani Enterprises, Syngene International, LIC Housing, Prestige Estate and Alkem Laboratories witnessed highest buying while highest selling was seen in Dewan Housing, PC Jeweller, HDFC AMC, Reliance Capital and Tata Communication during September."
If we see the year-to-date performance, the BSE Midcap index cracked 22 percent and Smallcap lost 28 percent while the 30-share Sensex was flat.
Stocks in both midcap and largecap corrected between 10 percent and 70 percent YTD. Some of them even hit new 52-week lows in the current brutal sell-off.
"Mid & Smallcaps are now trading at 25-40 percent discount to the frontline counters, hence catching the bottom cycle is difficult and now if the investor has at least 1-2 years plus investment horizon, can start adding into mid & smallcap space gradually at every levels to generate extra alpha in the portfolio," Prashanth Tapse, AVP Research at Mehta Equities told Moneycontrol.In smallcap segment, AMCs made highest buying in Gujarat Fluoro, V-Mart, SpiceJet, KPIT Technologies and IFGL Refractories while Monsanto India, Balrampur Chini, Techno Electric, Infibeam Avenues and Kaveri Seed saw largest selling in September, ICICI Securities said.