MF Update: FY20 equity AUM drops first time in 6 years

The fall in the equity market in the last two months of FY20 is leading to various record, albeit not positives one. One of the dubious records is a drop in the equity asset under management (AUM) of the domestic mutual fund industry after six years of continuous rise. It declined by 25.7 per cent on a yearly basis. At the end of March 2020, the average AUM of the domestic mutual fund industry stood at Rs 6.6 lakh crore, compared to Rs 8.8 lakh crore, including ELSS at the end of FY19. The average AUM at the end of March 2020 is lowest since October 2017.

The prime reason for such a drop in equity AUM is fall in the equity market indices. In year FY20, the large-cap index fell by almost 27 per cent whereas, mid-cap and small-cap indices fell by 32 per cent and 37 per cent, respectively. It was better net inflows in the equity MF that led to a slower decline in AUM, compared to the decline that we saw in the indices. The equity schemes saw an increase in the sale of 10 per cent on yearly basis to Rs 3,34,700 crore.

The fall in the equity market also led to a change in the positioning of equity funds. Weight of defensive sectors such as technology and consumer increased by 600 basis point to 33.5 per cent whereas, the weight of cyclical declined by 520 basis point to 56.4 per cent at the end of March 2020. The largest jump was witnessed in the weight of the consumer sector that now stands at the second position in sector allocation of mutual funds, as it was at the fifth position, a year ago.