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Preference for Liquid and Dynamic Funds

There have been certain major changes in the saving and investment trends and patterns among customers. Manish Mehta, National Head, Sales, Digital Business & Marketing at Kotak Mahindra AMC, explains: “We are seeing greater acceptability for mutual funds vis a vis traditional investment products. Equity investments through SIP / STP has picked up. Familiarity amongst potential investors about SIP as an investment tool is high. Some of the factors have been the shift from physical assets to financial assets.”

Shift Across Segment

AMFI’s investor awareness campaigns has helped people become more familiar with mutual funds. Manish observes: “There is no one class of investors who are shifting from traditional investment products to MFs. The shift is across segment i.e. FD clients, newly joining workforce and retirees who are looking at regular income.”

There has been a net inflow of Rs530 billion in liquid funds for the month of November. Umang Thaker, Head of Products at Motilal Oswal AMC, points out: “A preference for liquidity is evident in the investor behavior. It is also no surprise that dynamic funds – funds which switch between debt and equity based on valuation parameters – got the maximum allocation in November. A near term volatility in the benchmark index (Nifty was down 5% in November) and a general aversion to perceived high valuations are the likely reasons.”

Flexi Cap Gains Traction

Among the equity open ended category, Flexi Cap funds enjoyed the maximum flows of over Rs26 bn followed by the large cap category at Rs16 bn in November. Umang believes: “MF distributors and advisors have also been instrumental in educating investors about the merits of the dynamic and asset allocation category. Some smart money seems to have exited thematic and sectoral funds as profit booking is a natural response after a rally.”

2022 Flavours: Financials, IT

Capital markets have been in an uptrend barring last couple of months. With inflation moving up and the Federal Reserve showing its intentions to tighten liquidity, markets in last couple of months have been a bit volatile with the FIIs being seller almost on a daily basis.

Santosh Kumar Singh, Head of Research at Motilal Oswal AMC, predicts: “2022 is starting with an expectation of tightening liquidity, increasing interest rates and uncertainty around covid still remaining. However, on the brighter side, economy is showing strength and the corporate earning cycle is on an uptrend. With two opposing themes playing around, I would expect 2022 to be much more range bound for the broader markets. In financials sector, large banks are very well placed with one of the best expected years on credit quality front in more than a decade, unless covid creates havoc. We can also see credit growth starting to pick up. Non-lending financials, specifically insurance, had a bad year in CY21 from stock market perspective despite environment turning positive structurally. We can see CY22 turning out to be great for them with traction in earnings and cheap valuations.”

Digitization of the economy was the predominant theme during CY21 with IPOs of multiple new age digital companies. Singh adds: “Digitization has also meant that the Indian IT companies are growing at the fastest pace seen over last decade. We may see this theme to remain one of the predominant one during next year as well. Both private capex as well as household capex were missing for last 5 years, we can see a revival driven by lower interest rates and pent-up demand. Also, government will have to focus on job creation which may lead to higher capex.”

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