The outflow from equity and equity-oriented mutual fund schemes continued for the fourth consecutive month as experts feel the consistent rally in equity markets and caution ahead of US elections could be the reason for profit booking in October.
The market gained around 4 percent during the month despite rangebound trade backed by opening of almost entire economy after lockdown and falling infections count, better-than-expected September quarter earnings and consistent FII support though DIIs were net sellers.
Investors sold Rs 2,724 crore of investment in equity and equity-oriented mutual fund schemes in October compared to selling of Rs 734 crore in September, but SIP inflows remained strong at Rs 7,800 crore in October, which was marginally above the September inflows of Rs 7,788 crore.
"The continued rally in equity markets combined with the expectation of volatility around US elections, appear to have led some investors to book profits in equity and move to short term debt funds. Many of them may come back to equity funds if there is a correction. The SIP book has shown a growth over the previous month which is very encouraging from a retail flow perspective," G Pradeepkumar, CEO at Union AMC told Moneycontrol.
Mutual funds made a fresh investment in 11 stocks during October including Fermenta Biotech, GTPL Hathway, HDFC Warrant, Jash Engineering, Reliance Industries partly paid up equity shares, Shakti Pumps, Suzuki Motor Corporation, Mindspace Business Parks REIT and Themis Medicare.
Maximum fresh buying was seen in Equitas Small Finance Bank which launched IPO and listed its shares in October. Six mutual funds invested Rs 115.41 crore in the small finance bank, while the lowest fresh investment of Rs 0.07 crore was seen in Shakti Pumps.
State-owned defence company Mazagon Dock Shipbuilders also witnessed fresh buying from mutual funds as it was listed in October itself after its maiden public issue. MFs acquired Rs 11.38 crore worth of shares in Mazagon Dock.
On the other hand, mutual funds completely exited seven stocks during the month, which were Angel Broking (Amalgamated), Accelya Solutions India, Fiem Industries, Future Supply Chain Solutions, HBL Power Systems and Hexaware Technologies.
Angel Broking had been trading below its issue price from the listing day (October 5), but the stock spiked above its issue price of Rs 306 towards the end of October and went up to around Rs 350 levels. And there Aditya Birla Sun Life MF might have taken the opportunity to sell the shares worth Rs 20 crore.
Overall as per the monthly data released by the Association of Mutual Funds in India (AMFI), total assets under management (AUM) for the mutual fund industry increased considerably to Rs 28.22 lakh crore as of October 31, compared to Rs 26.85 lakh crore at the end of September 30.
Even mutual fund systematic investment plans (SIP) accounts also grew to 3.37 crore, from to 3.34 crore in September.
"This is not the time to withdraw money from equities because macro conditions portend a new economic cycle, it is for the first time in many years we have seen a quarter where earnings are way ahead of consensus estimates and corporate performance has surprised on the upside," Aashish Somaiyaa, Chief Executive Officer at White Oak Capital said.
The equity markets seem to be celebrating Diwali much early as benchmark indices reached to a fresh record high levels in the second week of November, rising a 67 percent from their March lows.
Among Nifty50 stocks, the highest buying by mutual funds was seen in Bajaj Auto, BPCL, Dr Reddy's Labs, Hindalco, ICICI Bank, SBI, UPL and Maruti Suzuki India.
However, the highest selling was seen in Adani Ports, Axis Bank, Bajaj Finserv, Eicher Motors, GAIL, HDFC Life, NTPC, ONGC, TCS and Tata Motors.Disclaimer: "Reliance Industries Ltd. is the sole beneficiary of Independent Media Trust which controls Network18 Media & Investments Ltd which publishes Moneycontrol."