Mutual funds invest Rs 1,200 crore in IPOs in January, IRFC the biggest gainer

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Mutual funds (MFs) went shopping in the primary market in January 2021 and spent Rs 1,200 crore in the various initial public offerings during the month.

Of the Rs 1,200 crore, Indian Railway Finance Corporation (IRFC) cornered the biggest chunk of Rs 927 crore, Indigo Paints garnered Rs 140 crore and Home First received Rs 120 crore, a note from brokerage firm Edelweiss said.

Among the stocks that witnessed buying interest from mutual funds were IRFC, HCL Technologies, Axis Bank, Asian Paints, Larsen & Toubro and HDFC.

On the flip side, Reliance Industries, Infosys, Bharti Airtel, Power Grid Corporation and TCS witnessed selling from MFs.

Domestic MFs trimmed positions in the Nifty heavyweights like Reliance Industries (Rs 2,081 crore), Infosys (Rs 2,011 crore), Bharti Airtel (Rs 1,200 crore), Power Grid and TCS (Rs 1,000 crore each). Mutual Funds were net sellers in telecom major Bharti Airtel, while FPIs increased bet in telecom stocks in January, said Edelweiss.

Equity mutual funds witnessed an outflow of Rs 9,253 crore in January, making it the seventh consecutive monthly withdrawal, primarily due to a massive pullout from the newly created flexi-fund category.

Also, investors pulled out Rs 33,409 crore from debt mutual funds after investing Rs 13,863 crore in December, data from the Association of Mutual Funds in India showed.

Overall, the mutual fund industry witnessed a net outflow of Rs 35,586 crore across all segments during the period under review, compared to Rs 2,968 crore inflow seen in December on investment from hybrid and other schemes.

In the last three months, mutual funds net sold Indian equities worth over Rs 70,000 crore. During the October 31, 2020-to February 10, 2021 period, the benchmark index Nifty TRI gained 30 percent, where 10 equity mutual fund schemes gave an absolute return of more than 45 percent. These include two schemes from UTI and ICICI AMCs.

Read more: 10 equity mutual fund schemes that gave best returns in January

“The Indian markets have witnessed record highs and the outflows are just on the back of profit-booking by investors. The contribution through systematic investment plans (SIPs) has been lesser than the previous month but still stays above the Rs 8,000-crore mark. This shows slow moderation in the SIP market as well and these numbers should stabilise in the coming few months,” said brokerage firm Narnolia Financial Advisors.

In the last three months, a lot of funds recategorised themselves from multi-cap to flexi-cap to adhere to Securities and Exchange Board of India’s norms for multicap funds. The uncertainty led to high redemptions in the flexi-cap category, the brokerage firm said.

Disclosure: Reliance Industries Ltd. is the sole beneficiary of Independent Media Trust which controls Network18 Media & Investments Ltd.

Disclaimer: The above report is compiled from information available on public platforms. Moneycontrol advises users to check with certified experts before taking any investment decisions.