The past couple of years were a tough year for the mutual fund industry. A scan through the headlines, and the pain becomes apparent. Newspapers were flooded with articles, ranting about lower returns that mutual funds were generating. Obituaries were written all around about how mutual funds were losing the trust of the investors. The narrative kept getting stronger, as outflows kept growing month after month and AUMs kept declining.

Let's have a look at it through the numbers. Equity AUM steadily declined after hitting an all-time high of Rs 8 lakh crore in April 2018. It came crashing down below Rs 6 lakh crore in April 2020 (at the start of the pandemic).

The Turn-Around

The second half of the story is a tale of a complete turnaround. It is a tale of complete course correction and roaring come back. Cut to July 2021, equity AUM has touched an all-time high of Rs 12.1 lakh crore, a 50% growth in three years (From AUM of Rs 8 lakh crore in April 2018).

Including debt funds and other schemes, the MF industry's overall AUM increased by 4.9% on a monthly basis to Rs 35.3 lakh crore in July 2021.

Where Is the Money Coming From?

Notably, while equity AUM has touched an all-time high, foreign funds are seen withdrawing from mutual funds. Their outflow at USD 1.7b in July was the highest since March 2020. In their absence, domestic mutual funds have increased their investments. Their total inflow in June 2021 was at USD 2.5b, the highest since March 2020.

Where Is the Money Going?

During July 2021, mutual funds increased their weights of metals, cement, real estate, chemicals, telecom, textiles, and retail sectors while moderating their exposure to oil & gas, private banks, automobiles, utilities, consumers, and technology.

Mutual fund's exposure in the metal sector is at a 33-month high, and that in oil & gas is at a 48-month low. MF exposure in private banks, the erstwhile hot favourite sector, is constantly coming down.