With the festive season around the corner, mutual funds are making strategic portfolio adjustments to maximize returns. The total assets under management (AUM) of India’s mutual fund industry have climbed to Rs 67.1 lakh crore by September 2024, reflecting growing investor confidence.
Equity mutual funds, a popular investment avenue, offer stability and diversification compared to direct stock market investments. Fund managers continuously assess market trends, adjusting portfolios by adding or removing stocks and reallocating investments across sectors. Here’s a closer look at how mutual funds positioned themselves ahead of Diwali and the sectors seeing the most action.
AUM Growth Driven by Market Performance and Equity Inflows
By the end of September 2024, the AUM of mutual funds grew 0.6% month-over-month (MoM) to Rs 67.1 lakh crore. Equity AUM specifically rose by 3.3% MoM, driven by positive market movements (Nifty up by 2.3% MoM) and increased sales in equity schemes.
However, despite the inflow of funds, redemption activity increased by 20.6%, resulting in a 12.3% decline in net inflows to Rs 364 billion during the month. Balanced funds and other exchange-traded funds (ETFs) also showed AUM growth, while liquid and income funds reported a decline.
Key Sector Shifts: Where Funds Are Investing More (and Less)
Mutual funds made targeted changes to their sector allocations in September:
- Increased Investment:
Funds raised exposure in private banking, metals, retail, automobiles, consumer durables, and utilities sectors.- Private banks’ weightage: Increased to 16.1% (+20 bps MoM)
- Metals’ weightage: Rose to 2.7% (+20 bps MoM)
- Reduced Investment:
Technology, oil & gas, capital goods, healthcare, and PSU banks saw reduced exposure.- Technology sector’s weightage: Declined to 8.8% (-40 bps MoM)
- Oil & gas weightage: Dropped to 6.2% (-30 bps MoM)
Top Stocks Bought by Mutual Funds in September
As part of their strategy, mutual funds increased investments in companies with strong market fundamentals and long-term growth potential. The top 10 stocks that attracted fresh inflows include:
- HDFC Bank
- Bharti Airtel
- Mahindra & Mahindra (M&M)
- Axis Bank
- Maruti Suzuki
- ICICI Bank
- Samvardhana Motherson
- GE T&D India
- Trent
- Zomato
Top Stocks Sold by Mutual Funds in September
On the flip side, fund managers trimmed or exited positions in several underperforming or overvalued stocks. The following 10 stocks saw major sell-offs:
- Tata Motors
- TCS
- ONGC
- Vodafone Idea
- State Bank of India (SBI)
- Power Finance Corporation (PFC)
- Infosys
- Oil India
- CG Consumer Electronics
- Bharat Forge
What’s Driving These Changes?
Mutual funds make strategic adjustments based on changing market conditions and the business outlook of individual companies. With economic uncertainties, inflation, and global factors affecting markets, the funds are seeking to capitalize on growth opportunities while minimizing risks.
By focusing on private banking, retail, and consumer-oriented stocks, fund managers aim to benefit from rising domestic demand. The reduced weightage in technology and oil & gas reflects caution, possibly due to concerns over sector performance and fluctuating oil prices.
These portfolio moves provide investors with insights into how mutual funds are positioning themselves for the upcoming months. Those looking to invest can consider these trends and align their strategies accordingly.
Disclaimer: This article is for informational purposes only. Please consult your financial advisor before making any investment decisions.
