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How equity MFs became an unlikely balm for COVID-induced financial woes

Though the equity market took a step back amid the rise in COVID-19 cases, majority of stocks saw an impressive rebound from their March 2020 lows. Investors continued to use the market correction to invest in Indian equities. Domestic mutual funds followed suit. Most of the equity oriented funds have delivered commendable returns over the last two years

March 11, 2022 / 11:21 AM IST
MUTUAL-FUNDS
Despite uncertainty around the pandemic continuing to spook the economy all over the world, domestic equity market registered a massive runup over the past couple of years. Though the equity market took a step back amid the rise in COVID-19 cases, majority of stocks saw an impressive rebound from their March 2020 lows. Investors continued to use the market correction to invest in Indian equities. Domestic mutual funds too followed suit. Most of the equity oriented funds delivered commendable returns over the last two years.
The S&P BSE Sensex and Nifty 50 closed at their lifetime highs of 61,766 and 18,477 points, respectively. Between March 2020 and October 2021, Nifty 50 went up by 147 percent; Nifty Midcap 150 and Nifty Smallcap 250 indices returned 197 percent and 238 percent, respectively. Vetri Subramaniam, CIO at UTI AMC says, “the returns delivered by equities over the past 2 years reflect a starting point where equity valuations were cheap and an extended period of significant fiscal and monetary support to the economy. The significant growth in corporate profits over this period was a positive surprise”. A record number of initial public offerings was also supported the market recovery from pandemic downturn.
The S&P BSE Sensex and Nifty 50 closed at their lifetime highs of 61,766 and 18,477 points, respectively. Between March 2020 and October 2021, Nifty 50 went up by 147 percent; Nifty Midcap 150 and Nifty Smallcap 250 indices returned 197 and 238 percent, respectively. Vetri Subramaniam, CIO at UTI AMC, says, “The returns delivered by equities over the past 2 years reflect a starting point where equity valuations were cheap and an extended period of significant fiscal and monetary support to the economy. The significant growth in corporate profits over this period was a positive surprise.” A record number of initial public offerings also supported the market recovery from the pandemic downturn.
The overall AUM of the MF industry grew by 70% in the last two years to Rs 39 trillion (as of February 2022). Among the categories, equity funds, global funds and passively managed funds saw notable growth in their AUM during the period implying investors continued to use the market correction to invest in Indian equities. It was evident from the AMFI data that show, equity-oriented funds witnessed robust net inflow of Rs 1,21,698 crore during this period.
The overall AUM of the MF industry grew by 70% in the last two years to Rs 39 trillion (as of February 2022). Among the categories, equity funds, global funds and passively managed funds saw notable growth in their AUM during the period implying investors continued to use the market correction to invest in Indian equities. It was evident from the AMFI data that show, equity-oriented funds witnessed robust net inflow of Rs 1,21,698 crore during this period.
Retail investors found favour in categories such as passive funds, global funds and gold ETFs. The total number of accounts in these categories saw manifold increase over the last two years. Passive investing gained momentum among investors due to the recent underperformance of active largecap funds against their benchmark such as Nifty 50 TRI. Diversification in gold ETFs and mouthwatering recent returns in global funds attracted more retail investors. Over the last two years, more than 2.8 crore retail investors folios were added.
Retail investors found favour in categories such as passive funds, global funds and gold ETFs. The total number of accounts in these categories saw manifold increase over the last two years. Passive investing gained momentum among investors due to the recent underperformance of active largecap funds against their benchmark such as Nifty 50 TRI. Diversification in gold ETFs and mouthwatering recent returns in global funds attracted more retail investors. Over the last two years, more than 2.8 crore retail investors folios were added.
Systematic investment plans (SIPs) have become a popular route in India to invest in mutual funds. The number of new SIP registered has been increasing despite volatility. Over the last two years, more than 2 crore new SIP accounts were added. It shows how retail investors are matured and willing to continue their SIPs despite market ups and downs. The total number of SIP accounts stood at 5.17 crore as of February 2022.
Systematic investment plans (SIPs) have become a popular route in India to invest in mutual funds. The number of new SIPs registered has been increasing despite volatility. Over the last two years, more than two crore new SIP accounts were added. It shows how retail investors are matured and willing to continue their SIPs despite market ups and downs. The total number of SIP accounts stood at 5.17 crore as of February 2022.
Funds invested in midcap and smallcap stocks benefitted the most over the last years. They outperformed the largecap counterparts. Quality mid and smallcap stocks found favour among investors given their better valuations. Mid and smallcap stocks part of technology, basic-materials and industrials sectors demonstrated resilience during the period.
Funds invested in midcap and smallcap stocks benefitted the most over the last years. They outperformed the largecap counterparts. Quality mid and smallcap stocks found favour among investors given their better valuations. Mid and smallcap stocks part of technology, basic-materials and industrials sectors demonstrated resilience during the period.
The assets under management (AUM) of international funds offered by domestic mutual funds for Indian investors went up to Rs 39,658 crore (as of Feb 2022) from Rs. 3,688 crore two years ago before. Number of accounts went up six-fold. Superior returns from US indices, a weak rupee vis-à-vis the dollar and the newer investment opportunities in overseas markets made investors choose international funds. Note that as directed by the SEBI, mutual funds have now stopped accepting fresh lumpsum investments in schemes dedicated to investing in overseas stocks.
The assets under management (AUM) of international funds offered by domestic mutual funds for Indian investors went up to Rs 39,658 crore (as of Feb 2022) from Rs 3,688 crore two years ago. Number of accounts went up six-fold. Superior returns from US indices, a weak rupee vis-à-vis the dollar and newer investment opportunities in overseas markets made investors choose international funds. Note that as directed by the SEBI, mutual funds have now stopped accepting fresh lump sum investments in schemes dedicated to investing in overseas stocks.
Limited liquidity has been the cause of concern in the Indian ETFs landscape for years. However, the last two years saw significant surge in the traded volume in equity ETFs in the exchanges. India’s flagship ETF -- Nippon India ETF Nifty BeES has touched its record mark of a single day traded volume of Rs 351 crores on NSE recently. Hemen Bhatia, Head ETF, Nippon Life India AMC says, “Investors have realized utility an index ETF offers. They buy a basket of stocks via a low-cost passive fund such as Nifty BeES that gives exposure to almost 54 % of the market capitalization of all stocks listed on NSE. We have seen increased participation across investor category such as Retail, HNIs and Family offices since the onset of COVID, leading to massive rise in volumes across our broad market ETFs”.
Limited liquidity has been a cause of concern in the Indian ETFs landscape for years. However, the last two years saw significant surge in the traded volume in equity ETFs in the exchanges. India’s flagship ETF -- Nippon India ETF Nifty BeES -- has touched its record mark of a single day traded volume of Rs 351 crore on NSE recently. Hemen Bhatia, head of ETF, Nippon Life India AMC, says, “Investors have realised the utility that an index ETF offers. They buy a basket of stocks via a low-cost passive fund such as Nifty BeES that gives exposure to almost 54% of the market capitalisation of all stocks listed on NSE. We have seen increased participation across investor categories such as retail, HNIs and family offices since the onset of COVID, leading to massive rise in volumes across our broad market ETFs.”
Ghazal Jain, Fund Manager, Alternative Investments, Quantum MF says, “Gold prices are up approx 30% since March 2020. The asset class has stayed true to its nature by providing investors much needed diversification and inflation protection amid the financial market volatility induced by the pandemic, higher inflation and geopolitical tensions over the last 2 years. Time and again after a crisis, we have seen that investors start considering a strategic portfolio allocation to gold and this time was no different. Domestic gold etf aum has doubled from approx 8000 crores in 2020 to 16000 crores now. This higher buying interest has translated into higher trade volumes for gold ETFs on the exchanges.
Ghazal Jain, fund manager, alternative investments, Quantum MF, says, “Gold prices are up about 30% since March 2020. The asset class has stayed true to its nature by providing investors much needed diversification and inflation protection amid the financial market volatility induced by the pandemic, higher inflation and geopolitical tensions over the last 2 years. Time and again after a crisis, we have seen that investors start considering a strategic portfolio allocation to gold and this time was no different. Domestic gold ETF AUM has doubled from about Rs 8000 crore in 2020 to Rs 16,000 crore now. This higher buying interest has translated into higher trade volumes for gold ETFs on the exchanges."
Funds belonging to Technology, Small cap Funds and Energy & Power categories were the toppers while Banking, consumption and MNC funds were the laggards over the last two years. Value and infrastructure funds made a strong comeback.
Funds belonging to technology, small cap funds and energy & power categories were the toppers while banking, consumption and MNC funds were the laggards over the last two years. Value and infrastructure funds made a strong comeback.
Dhuraivel Gunasekaran
first published: Mar 11, 2022 09:29 am
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