Strong retail flow helps domestic mutual funds improve share in Institutional AUM

The share of the domestic mutual funds in the total institutional equity portfolio value reached a multi-year high of 17% at the end of December 2021, the data from the NSDL show. Helped by a rising appetite of Indian households for equities amid lack of other lucrative investment alternatives, a higher share of domestic funds augurs well at a time when fund flow by foreign portfolio investors (FPIs) shows a greater volatility.

The equity assets under management (AUM) of domestic mutual funds (MFs) grew by 50% year-on-year to Rs 19.8 lakh crore at the end of 2021, faster than 41% growth in overall institutional equity AUM. The AUM of domestic funds grew at a faster clip than the total institutional AUM in each of the six months to December.

The MF equity exposure includes equity funds, balanced funds, solutions-oriented schemes and exchange traded funds (ETFs). The total equity portfolio of institutional funds includes investment by FPIs, MF, insurance companies, banks, alternative investment funds, and corporates. It was Rs 116 lakh crore in 2021, equivalent to around 45% of the total market capitalization of Indian equities.

According to SEBI data, the domestic funds invested about Rs 53,157 crore in the secondary equity market between November and December —one of the highest in a two-month window. Their gross purchase in Decemberwas just Rs 3,048 crore less than the highest ever gross purchase of Rs 1.2 lakh crore in March 2020. The ratio of the domestic institutional AUM (includes, MF, insurance companies, NPS, banks, financial institutional funds) to the FPI AUM was at a 15-month high of 77.5% in December.