Mutual funds' equity portfolio value surges

ET Intelligence Group: The equity portfolio value of domestic mutual funds has scaled a new high, as local fund managers increased their wagers on stocks to benefit from prices that have cooled off from record levels.

The equity portfolio value of domestic funds rose to ₹27.90 lakh crore in September 2023, data from NSDL show, driven by increased investment by local funds that offset the impact of redemption by foreign funds (FPIs). Local funds invested more than ₹20,000 crore in equities last month, taking the three-month rolling cumulative investment by them to ₹59,715 crore - the highest in 14 months. It was the second month in a row when domestic funds invested more than ₹20,000 crore in equities.

The equity portfolio value of local funds captures all equity-related investments of local funds in equity MF, balance funds, index funds and exchange-traded funds. Consistent expansion in their equity assets under management has increased the MF-FPI equity AUM ratio to 0.51, an all-time high. Cash holdings of local equity funds stood at 5% of their total AUM at the end of August 2023. Cash holdings of large MFs such as SBI MF, ICICI Prudential and HDFC MF were 7.4%, 6.9% and 7.2%, respectively, according to data compiled by Motilal Oswal.

The sign of increasing heft of the local funds can be gauged from the fact that the share of the local funds in the total institutional equity AUM rose to 19.1% - also a record high - as they have been consistently outperforming the overall institutional equity AUM for the last 27 months by an average of 7 percentage points. In the last one year, local funds' AUM on average grew by 20.51% YoY, while total institutional equity AUM rose 12.5%.

The institutional equities assets under management constitute about half of India's total market capitalisation.