Mutual fund assets under management decline for second straight month in January amid market turmoil

• The mutual fund industry’s assets under management (AUM) in January stood at ₹39.6 lakh crore.
• This comes in the backdrop of erratic market movements in January due to a number of factors including a sharp sell-off from foreign institutional investors (FIIs), crisis in the Adani Group that battered the stocks, interest rate hike and budget expectations, and corporates’ December-quarter earnings.
• Mutual Funds were net buyers of shares worth ₹21,353 crore in January while FIIs withdrew ₹29,950 crore, according to a report by IDBI Capital.
• SIP inflows in January stood at ₹13,856 crore, compared with ₹13,573 crore in December.
  

The mutual fund industry’s assets under management (AUM) has declined for the second consecutive month in January – inching down to ₹39.6 lakh crore amid volatile market conditions, shows a report by Motilal Oswal.

This comes in the backdrop of erratic market movements in January due to a number of factors including a sharp sell-off from foreign institutional investors (FIIs), crisis in the Adani Group that battered the stocks, interest rate hike and budget expectations, and corporates’ December-quarter earnings.

The Nifty50 ended 2.4% lower month-on-month at 17,662 in January 2023 – the second consecutive month of decline. Until January 24, the benchmark index was largely flat, but the Hindenburg report on the Adani Group triggered a sharp decline. As a result, Nifty50 closed 443 points lower in January.

“In January 2023, DIIs (domestic institutional investors) reported the highest inflows since July 2022 at $4.1 billion. FIIs recorded the second consecutive month of outflows at $3.7 billion,” Motilal Oswal Investment Services said in a report.

Assets under management of equity mutual funds (including ELSS and index funds) were at ₹16.5 lakh crore in January, down 0.9% from last month, led by a decline in market indices, the report said.

“The month saw notable changes in the sector and stock allocation of funds. On a sequential basis, the weights of technology, automobiles, capital goods, consumer, metals, insurance, and utilities increased, while the weights of banks (private & PSU), NBFCs, cement, retail, chemicals, infrastructure, and textiles moderated,” said the report.

Mutual funds were net equity buyers of shares worth ₹21,353 crore in January while FIIs withdrew ₹29,950 crore, according to a report by IDBI Capital.

Some of the credit for this buying in equities also goes to retail investors who are consistent with their SIP (systematic investment plan) contributions despite volatility. SIP inflows in January stood at ₹13,856 crore, compared with ₹13,573 crore in December.

Stocks added and sold by mutual funds in January 2023
Source: IDBI Capital

Among the top 10 funds, the highest sequential decrease in equity value was seen in Axis Mutual Fund (-5.4%) followed by Aditya Birla Sun Life Mutual Fund (-2.9%), UTI Mutual Fund (-2.2%), DSP Mutual Fund (-2.0%), and Mirae Asset Mutual Fund (-1.8%), as per the Motilal Oswal report.

Mutual funds’ assets have been impacted as Indian benchmarks have been sliding, underperforming global peers including in the US, the UK, China and others in 2023 so far.

While there have been huge outflows by foreign institutional Investors (FIIs) recently, domestic institutional investors (DIIs) are also busy infusing capital with support from mutual funds.

The rout in the Adani Group stocks following the release of a damning report by US-based short seller Hindenburg on January 24 also impacted foreign capital flows – FPIs are flocking to other ‘attractive’ markets and shorting Indian equities

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