Equity-oriented schemes’ assets under management (AUM) of mutual fund houses in terms of cash as of July stood at Rs 57,045 crore, which was significantly higher than the five-year average of Rs 31,531 crore, according to a media report. It could be deployed to counter a potential selloff by foreign portfolio investors.
In relative terms, July’s cash level stood at 4.03 per cent, which was higher than the five-year average of around 3.58 per cent and the two-year average of 3 per cent, according to the livemint report attributing data to the Anand Rathi Group. While net inflows into equity schemes dipped 43 per cent month-on-month in July, SIP inflows remained steady at Rs 12,140 crore, enabling overall equity flows to remain in positive territory.
“AMCs are holding on to cash to deploy as and when required… Inflows have been steady with consistency in SIP numbers, which implies that there is a positive sentiment in the market. However, these inflows are not being deployed aggressively,” the report quoted Feroze Azeez, deputy chief executive of Anand Rathi Wealth, as saying.
Equity mutual funds attracted Rs 8,898 crore in July, a 43 per cent decline compared to the preceding month as markets continued to remain volatile amid concerns over inflation and rate hike expectations. For the 17th straight month, equity mutual funds witnessed inflows in July.
“There is a floor to the market from Rs 14 trillion of equity fund AUM… We can bring down the current cash level from 4 per cent to 0.5 per cent in a cheap market, with about Rs 50,000 crore being deployed from the cash held by AMCs in a falling market,” the livemint report said quoting Nilesh Shah, managing director and CEO of Kotak AMC.
The net inflows in July were lower compared to Rs 15,495 crore seen in June, Rs 18,529 crore in May and Rs 15,890 crore in April, according to data released by Association of Mutual Funds in India (Amfi) on Monday.
Equity schemes have been witnessing net inflow since March 2021. These schemes had witnessed outflows for eight months from July 2020 to February 2021, losing Rs 46,791 crore.
All the equity-oriented categories received net inflows in July with the Small Cap Fund category being the biggest beneficiary with a net inflow of Rs 1,780 crore. This was followed by the Flexi Cap Fund fund that witnessed Rs 1,381 crore net infusion. Besides, Large Cap Fund, Large & Mid Cap Fund and Mid Cap Fund witnessed over Rs 1,000 crore net inflow each.
Recently, domestic institutional investors have been booking profits even as FIIs have turned net buyers of shares. In August, DIIs sold shares worth Rs 6,053 crore, even as FIIs invested Rs 51,200 crore.
FPIs sold a massive Rs 2.46 lakh crore between October 2021 and June 2022 in the India equity markets. However, now, foreign investors have become net investors and pumped in Rs 49,250 crore so far in August on improvement in corporate earnings and macro fundamentals. They invested a net of Rs 5,000 crore in July.
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