Shift in sector allocation in MF schemes: Technology’s weight at 17-month low, oil & gas all-time high

There was a perceptible change in sector allocation by India's Top 20 domestic mutual fund (MFs) in October, a Motilal Oswal Financial Services report has said.

Despite falling sales and shrinking margins, the weight of automobiles increased, while fund houses pared their exposure to technology, private banks and metals.

"The month saw a notable change in the sector and stock allocation of funds. On a month-on-month (MoM) basis, the weight of automobiles, PSU banks, oil and & as, healthcare and consumer increased, while that of technology, capital goods, private banks, NBFCs, cement, metals and telecom moderated," the brokerage said.

Technology’s weight hit a 17-month low of 8.2 percent, down 50bp MoM and 110bp YoY. The sector slipped to the fifth position in sector allocation of MFs, the report said.

"The weight of oil and gas sector increased for the fourth successive month (up 30bp MoM and 170bp YoY) to hit an all-time high of 8.7 percent. The sector is now at the third position in sector allocation of MFs—it was at the seventh position 12 months ago," the report said.

Gross sales of equity schemes, including ELSS and arbitrage, were down 3 percent MoM to Rs 24,300 crore, while redemptions increased 10 percent MoM to Rs 14,900 crore. Consequently, net inflows slowed down from Rs 11,600 crore in the previous month to Rs 9,400 crore in October, the lowest in six months, said the brokerage firm.

However, inflows and contribution of systematic investment plans (SIPs) remained stable at Rs 8,250 crore in October, up 3 percent YoY.

Rising 7.4 percent MoM in October, the domestic mutual fund industry's assets under management (AUM) has now surpassed another key level of Rs 26 lakh crore.

The AUM has risen by a staggering 3.4 times from Rs 7.7 lakh crore in October 2009 to Rs 26.3 lakh crore in October 2019.

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