A ratio above one reflects a favourable outlook of investors towards a mutual fund category. If the reading drops below 0.5, it indicates rising pessimism. For equity MFs as a whole, it was 0.72 in December, up 20 basis points from the previous month.
Double-digit returns in the past year have prompted investors to book profits in large caps, and underperformance of large-cap funds to their benchmark indices coupled with rising popularity of exchange traded funds have also added to the redemption pressure. A sample of large cap funds having more than ₹1,000 crore assets under management (AUM) delivered a return of 19.3% in the past year, underperforming the respective benchmarks by 1.2%.
A surge in the gross inflow of sectoral funds in December has pushed large-cap gross inflows to the second spot for the first time in 20 months. In December 2020, the sectoral funds had the highest gross inflow of ₹7,439 crore, which is over two times the large-cap inflow.
On the other hand, the large-cap funds reported the highest outflow of ₹13,254 crore among all the fund categories in the past two months. The share of large-cap funds in the AUM of the equity mutual funds dropped by 109 basis points to 19% in the last calendar year. Also, large-cap fund folios dropped by 94,036 in the past two months.
