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Changing Dynamics: Smaller fund houses outpace major players in 2021

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Mutual-Fund

The mutual fund space has grown over the pandemic and interestingly so far in 2021, several smaller companies have gained momentum and outpaced the growth of established major players.

In tandem with the rise in the equity market, small players made giant strides during the year.

Equity schemes of fund houses like Quant Mutual Fund, ITI Mutual Fund, PPFAS Mutual have been among the best performing schemes so far in the year.

The assets under management of Quant witnessed over five-fold rise during January-July 2021. Its AUM in December 2020 stood at Rs 521 crore and by July-end it reached Rs 2,842 crore, showed data from primemfdatabase.com.

The AUM of ITI Mutual Fund rose over 100 per cent to Rs 1,879 crore and PPFAS Mutual Fund’s AUM also nearly doubled to Rs 14,318 crore.

Some of the schemes of relatively new fund houses have given blockbuster returns with several of them coming from Quant Mutual Fund. As per the market estimates, ICICI Prudential Technology Fund, Quant Tax Plan Fund, PGIM India Midcap Opportunities Fund, Quant Infrastructure Fund and Quant Active Fund are the top five equity funds giving best returns ranging from 80 per cent to over 100 per cent.

Kotak Mahindra Mutual Fund, a major player in the segment, has the highest AUM of over Rs 2.58 lakh crore as of July 2021, 13 per cent higher than Rs 22.78 lakh crore, the Prime Database data showed.

According to Pranav Haldea, Managing Director of Prime Database Group, the higher growth rate of AUM of smaller fund houses is due to low base effect along with their identification of specialised offerings.

“One reason is low base effect, and second I think smaller fund houses have done a commendable job in terms of identifying niches where they have specialised,” he told IANS.

He further said that performance of these mutual funds along with the incumbent giants will continue to be robust.

“The sort of AUM growth which you have seen in the mutual fund industry in the five odd years, the AUM now stands at close to 35-36 lakh crores. So the growth of these smaller fund houses will also extract a fair share of that growth,” he said.

Haldea told IANS that the growth will continue because there will be more channellising of retail savings into mutual funds going forward.

More and more retail investors in the last one and half years have come to the capital market as various other kinds of investment markets are not providing the investment returns that they are used to.

“So retail investors are increasingly looking at equity and the markets obviously are supportive and the markets are doing really well,” he said.

N.S. Venkatesh, Chief Executive, Association of Mutual Funds in India (AMFI) said: “Mutual Funds have emerged as the preferred savings-cum-investment avenue over the last few years, and the pandemic has actually triggered this shift towards Mutual Funds in a more pronounced way.”

This shift will continue in 2021 and beyond, accentuated by Sebi-driven initiatives towards transparency and disclosures, he said.

“Over the years, mutual fund industry too, has deepened its penetration, beyond top 15 cities, even as number of MF players has risen with new fund houses coming in to mutual fund industry, enabling steady but sure rise in the number of investors who have been embracing mutual funds as the preferred savings tool,” Venkatesh said.

The number of mutual fund investors in the country has doubled to 2.39 crore as of June 30, 2021 from 1.19 crore at the end of March 2017, thereby indicating that pandemic has actually had no impact on the inflows, he added.

The mutual fund industry AUM rose 4.9 per cent in July 2021 to a record Rs 35.3 lakh crore due to inflows into both equity funds and debt funds

An ICICI Direct Research report said that IT funds have been consistent outperformers in the last two to three years as the growth outlook improved for the sector in the post Covid world resulting in valuation re-rating of most stocks.

The sectors or segments like infrastructure, PSUs that lagged behind in the early part of the rally, have started to gain traction indicating the healthy trend of sector rotation, it said.

“Small cap funds have been consistent outperformers in the last one year after they were beaten down during the Covid pandemic induced market fall. Midcaps also followed small cap funds and have outperformed other categories. However, there seemed to be some profit booking recently as it underperformed in the last one month,” it said.

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Nifty, Sensex see firm recovery after RBI’s support to rupee

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Indian equity benchmarks posted a firm recovery, sustaining gains for the second week as investors looked past early inflation worries, especially after the central bank’s special dollar window for oil marketing companies helped the rupee rebound.

Nifty added 2.78 per cent during the week and gained 0.65 per cent on the last trading day to reach 23,146.

At close, Sensex was up 413 points or 0.56 per cent at 74,729. It gained 3.11 per cent during the week.

Market sentiment was dented earlier in the week by consumer inflation hovering near the upper end of the Reserve Bank of India’s tolerance band and a hotter‑than‑expected wholesale price index print that pushed benchmark bond yields to multi‑year highs.

The central bank raised the daily cash reserve ratio maintenance requirement to absorb surplus liquidity, adding to caution. Market confidence, however, improved after the central bank’s special dollar window for oil marketing companies and tighter hedging norms drove a rupee-rebound, analysts said.

“Expectations of a review of LTCG tax and STT, softer crude prices and easing bond yields further revived risk appetite, prompting investors to tilt towards counters with strong Q2FY27 business updates, though the rally remained concentrated in large-caps, with mid-caps posting modest gains and small-caps ending marginally lower,” they added.

“Participants should remain selective, maintain disciplined position sizing and favour a hedged approach amid elevated macroeconomic and earnings-related uncertainty,” the experts said.

Information technology (IT) sector emerged as the standout performer on robust earnings and upbeat management commentary, while healthcare and pharmaceuticals lagged as investors favoured sectors with stronger near-term earnings visibility.

Meanwhile, fast‑moving consumer goods stocks came under pressure amid concerns over margin compression from elevated input costs.

Broad market indices performed largely in line with the benchmark indices as Nifty Midcap100 added 0.58 per cent and Nifty Smallcap100 dipped 0.12 per cent during the week.

In addition, foreign institutional investors (FIIs) turned net buyers of Rs 11.66 billion in Indian equities on Friday after overall selling eased sharply this week as market sentiment improved.

FIIs remained net sellers for the ninth straight week but their weekly selling moderated to Rs 89.91 billion from Rs 302.94 billion the previous week. On the other hand, domestic institutional investors (DIIs) stayed net buyers for a ninth consecutive week at Rs 78.13 billion, though they were net sellers of Rs 36.61 billion on Friday.

The sustainability of the recovery will hinge on earnings growth broadening beyond IT with revenue and margin delivery across financials, consumption and industrials under close scrutiny, analysts said.

Investors are keen on India’s October PMI that will offer insight into domestic demand momentum, while US jobless claims and Japan’s inflation print will shape global rate expectations.

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Japanese delegation visits MLFF tolling system near Delhi

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A Japanese delegation visited the Multi-Lane Free Flow (MLFF) tolling system in Mundka-Bakkarwala on Friday on the sidelines of the 12th India–Japan Joint Working Group Meeting on Roads and Road Transportation.

The MLFF system provided insights into India’s technology-driven initiatives for seamless and efficient highway travel.

At the MLFFs, the National Highways Authority of India (NHAI) uses a combination of RFID-based FASTag electronic toll collection, automatic number plate recognition (ANPR) and AI analytics to allow vehicles to pass through charging points without stopping, slowing down or remaining in a designated lane.

MLFFs have already been installed at Choryasi in Gujarat, Mundka in Delhi, Gharaunda in Haryana and Daulatpura and Manoharpura in Rajasthan.

While 12 further locations have been awarded for conversion, tenders have also been launched covering an additional 104 toll plazas around the country.

The MLFF at Choryasi on the Surat–Bharuch section of NH-48 was the first to become operational.

The one at Mundka on Delhi’s Urban Extension Road-II was the second.

The expansion plan represents a significant shift from India’s traditional barrier-based toll plazas.

Rather than moving immediately to satellite-based toll collection, the Indian government has opted to build on the country’s established FASTag system and combine it with ANPR and AI.

Expert committees had recommended further consideration of GPS-based barrier-free tolling because of security, privacy and operational control issues, the Ministry of Road Transport and Highways has indicated.

FASTag and ANPR/AI was thus selected as the technology for the current MLFF programme.

The session of the India–Japan Joint Working Group on Roads and Road Transportation Sector was successfully held at Bharat Mandapam in New Delhi.

Discussions focused on advanced construction technologies, bridge and tunnel engineering, sustainable infrastructure and digital innovations, fostering the exchange of technical expertise and best practices.

“The meeting reaffirmed both nations’ commitment to safe, sustainable and technology-driven road infrastructure, aligned with the vision of Viksit Bharat @ 2047,” the Ministry said in a statement.

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India-US trade deal 98-99 percent done: US official

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Washington, Oct 16: A long-awaited trade agreement between India and the United States is almost complete, with only one or two per cent of negotiations remaining, a senior US official said, signalling that the two countries are approaching a breakthrough after months of high-level discussions.

The official said the biggest issues had already been resolved and that negotiations were continuing at the highest political levels, including between President Donald Trump and Prime Minister Narendra Modi.

“The biggest items have been settled. I mean …., it’s pretty much done. We have that one, one or two per cent left,” the official told reporters during a State Department briefing on Friday.

The remarks came ahead of Secretary of State Marco Rubio’s scheduled visit to India, where he will hold discussions with Indian government officials and leading business executives in Mumbai and Jamnagar.

The official said the two governments remained in constant contact over the proposed agreement.

“We are actively engaged every single week,” the official said, adding that high-level discussions on the trade deal were taking place regularly.

The official cited recent diplomatic engagements involving US Trade Representative Jamieson Greer, India’s Commerce Minister Piyush Goyal and conversations between Trump and PM Modi as evidence of the momentum behind the negotiations.

However, the official also identified a significant complication that had delayed the agreement.

An earlier understanding had been linked to the International Emergency Economic Powers Act, or IEEPA, but the legal framework had to be reconsidered after the law was struck down, according to the official.

The development forced negotiators to revisit elements of the proposed agreement and contributed to several additional months of discussions.

Despite those complications, the official expressed optimism that the remaining differences could be resolved soon.

Rubio is scheduled to travel first to Uzbekistan for meetings with Central Asian leaders before proceeding to India.

In Mumbai, he will meet Indian government counterparts and senior executives from some of the country’s largest companies.

The official said the decision to visit Mumbai rather than New Delhi reflected the administration’s growing emphasis on commercial diplomacy and Indian investment in the United States.

Rubio will also travel to Jamnagar.

The official said Washington was seeking closer engagement with India across information technology, pharmaceuticals, defence cooperation and other sectors.

Further visits by senior American Cabinet officials are also anticipated next year as both governments seek to expand bilateral engagement.

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