Mutual fund redemptions increased 39% in 2023

NEW DELHI: Mutual fund redemptions increased 39 per cent year on year to Rs 3,323 billion, leading to a decline in net inflows to Rs 2,063 billion in calendar year CY23 from Rs 2,383 billion in CY22, Motilal Oswal Financial Services said in a report.

Domestic MFs’ equity assets under management (AUM) rose for the 10th consecutive year to reach Rs 23.8 trillion (+43 39 per cent YoY) in CY23. The rise in AUM was fueled by an uptrend in market indices (Nifty: +20 39 per cent YoY) and higher equity scheme sales (at Rs 5,386b +13 39 per cent YoY). The MF industry’s total AUM increased 27 39 per cent YoY (Rs 10.9t) to Rs 50.8t in CY23, propelled by the growth in equity funds (Rs 7,224b), other ETFs (Rs 1,255b), balanced funds (Rs 1,109b), and arbitrage funds (Rs 595b).

Investors continued to park their money in mutual funds, with inflows and contributions in systematic investment plans (SIPs) reaching a new high of Rs 176.1 billion in December 2023 (up 3.1 39 per cent MoM and 29.7 39 per cent YoY), the report said.

The year saw a notable change in the sector and stock allocation of funds. The weight of defensives improved 120bp to 29.6 39 per cent, propelled by an increase in the weights of Utilities, Healthcare, and Telecom; while Technology, and Consumer moderated.

The weight of Domestic Cyclicals declined 110bp to 62.1 39 per cent, pulled down by BFSI, and Chemicals.

Global Cyclicals’ weightage, too, decreased 20bp to 8.2 39 per cent, led by Oil & Gas.

Capital Goods improved its position to fourth from eighth a year ago, with the weight increasing 130bp to 7.5 39 per cent in CY23, the report said.

The BFSI pack, however, saw a massive 360bp contraction in weight to 29 39 per cent. Technology’ position remained unchanged over the last one year, with the weightage moderating 30bp to 9.4 39 per cent.

Healthcare saw a rise in weight to 6.9 39 per cent (+60bp YoY) in CY23. Utilities witnessed a surge in weight to 4.3 39 per cent (+110bp YoY), the report said.