While stock market climbed higher in June on the hopes of recovery with the re-opening of economic activities, mutual funds took the opportunity to book profits as COVID-19 cases kept rising.
The BSE Sensex and Nifty50 climbed over 7.5 percent each last month. Meanwhile, the broader market outperformed benchmark indices with the Nifty Midcap index rising nearly 11 percent and Smallcap index gaining 15 percent.
Inflows into equity funds declined substantially to a four-year low of Rs 241 crore in June 2020 from Rs 5,257 crore in May 2020.
SIP inflows also consistently moderated, but remained strong at Rs 7,927 in June compared to Rs 8,123 crore in May, Rs 8,376 crore in April, and Rs 8,641 crore in March - a record level despite crash in equity market.
"While net flows into equity funds have been tepid, month on month increase in folios of equity funds is encouraging. The drop in net flows into equity funds could be attributed partly to profit booking on the back of the rally in equity markets witnessed in June 2020," G Pradeepkumar, CEO at Union AMC told Moneycontrol.
"The slowing monthly SIP contribution has been worrying, but it is not completely unexpected given the strain on cash flows and incomes experienced by many investors on account of the COVID-19 situation. Once the economic situation improves, the flows should also pick up," he said.
On the stock front, mutual funds made highest buying in HDFC AMC, Piramal Enterprises, Adani Transmission, SBI Life and HDFC Life among largecaps during June, ICICI Direct said.
However, largecap stocks, which saw selling by AMCs at a consolidated level were ICICI Prudential Life, Zee Entertainment, Havells India, Tata Motors and ONGC, the brokerage said.
In May, Piramal Enterprises had seen highest selling by MFs, whereas Zee Entertainment and Havells India were in the top 10 buying list of MFs.
Among midcaps, stocks like L&T Finance Holdings, GMR Infrastructure, 3M, JSW Energy and MindTree witnessed buying during June, while PNB Housing Finance, SAIL, New India Assurance, Vodafone Idea and Glenmark Pharma saw highest selling by AMCs, ICICI Direct said.
Jindal Steel & Power, which saw second largest buying by MFs in May, dropped to 10th position in the June buying list. LIC Housing Finance dropped to 6th position in June from second spot in May.
In the smallcap space, stocks like Andhra Paper, JM Financial, Metropolis Healthcare, MOIL and Wheels India witnessed highest buying, while stocks that were sold by AMCs were Indostar Capital, Alembic, Jubilant Life Sciences, Raymond and Welspun Corp, ICICI Direct said.
Overall, mutual funds were net sellers in June to the tune of Rs 3,690 crore in equity against Rs 4,977 crore worth of buying in May. Even in July so far, they have net sold equities worth Rs 2,716 crore.
However, they were strong buyers in debt segment to the tune of Rs 38,012 crore in June against Rs 12,587.55 crore in May. MFs have been net buyers so far in July as well at Rs 19,682.80 crore.
"In debt funds, the change in investors' behaviour is clearly visible as the inflows in categories like low duration, short term, and corporate bond have increased significantly over last month. This indicates that investors are giving preference to safety over anything and this is a welcome change. Investors are better off in these categories as there is minimal exposure to credit or interest risk," Sayalee Khandke, Manager Research at Investica said.Disclaimer: The views and investment tips expressed by investment expert on Moneycontrol.com are his own and not that of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.