While the market is looking up, mutual fund investors seem to be tracking back. While June’s mutual fund data came as a shocker; the food & Staple industry found itself in a sweet spot amid the lockdown.
Market recouped its losses once again as investors continue to reimpose their faith in the economy. The speed with which the market is moving, June's mutual fund data was nothing less than a shocker. While the SIP flow moderated for the third consecutive month, net inflow in equities fell to a record low of Rs 225 crore.
Surely, liquidity alone is not an issue. While June net equity inflows fell to a record low, CDSL opened 11.5 lakh Demat accounts in the first two months of FY21 itself. It had opened 38 lakh accounts in the entire FY20.
There is no denying that the figure of equity flows is shocking. But, a deep dive suggests that the picture is not as bad as it is perceived to be. Gross equity inflow increased by 6% MoM in June to Rs 13,761 crore. However, redemption jumped sharply (up 76% MoM) to 13,535 crore, which led to the sharp reduction in net inflows.
Food and staples in a sweet spot:
In the consumer goods segment, The earning trend in Q1FY21 seems to be skewed in favour of the food & staples category. The demand for packaged foods (biscuits, noodles), branded food essentials (atta, pulses, coffee, salt, tea), premium edible oil remained elevated due to the overall shift from dine-out to home cooking culture.
With a focus on health and hygiene, household insecticides and nutrition (Chyawanprash, honey) categories also performed well. On the other hand, personal care (skin cream, hair oil, hair colour, shampoo), alcohol and tobacco markets were hit hard.
Post Q1, the situation is expected to improve even for consumer discretionary companies as the opening of the economy along with good monsoon is likely to supplement rural income.
Key takeaways:
Mutual fund investors did admirably well to absorb the volatile market conditions. While the first signs of green shoots are appearing, one needs to stick to the investment routine.
Rural market is already looking up. With increased on-ground activities and festival season around the corner, urban markets are also expected to come out of exile soon.
