Only 2 of 23 mutual fund themes gained in August; IPO, defence stay green as auto, railways and tech slide : Report

As the domestic equity market saw broad-based pressure in August, only two mutual fund themes – IPO and defence remained in positive territory among the 23 themes, whereas auto and railways were the biggest laggards, according to a report by Vallum Capital,

IPO and defence themes gained 2.2% and 1.4%, respectively and at the other end, auto and railways were the biggest laggards, falling 6.5% and 6.4%, while Technology declined 6.1%. The IPO and defence sector based funds received an inflow of Rs 37 crore and Rs 235 crore respectively in August.

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While auto and railway sector based funds received an inflow of Rs 244 crore and Rs 22 crore respectively, tech sector based funds saw an outflow of Rs 523 crore.

The report highlighted that the divergence within sectors was particularly sharp. Internet & Digital gained 3.2%, while the IT Index fell 9.1%, pointing to a significant difference in how investors are positioning within technology rather than a broad sector-wide move.

Consumption theme was down 4.5% and saw an outflow of Rs 357 crore.Healthcare and business cycle themes were down 0.8% and 1.5% respectively.
The energy sector was down 1.8% and received an inflow of Rs 18 crore whereas commodities theme was down 1.6%.

How other asset classes performed

The domestic market turned distinctly risk-off, with equity falling 2.1% in August, while money market assets were the only major asset class to deliver a positive monthly return at 0.5%.

Commodities declined 0.5% during the month but remained the strongest performer on a year-to-date basis, returning 12%, nearly nine times equity’s 1.4% YTD return. Fixed income was flat for the month and delivered a 3.7% YTD return.

The shift towards safety was also visible in fund flows. Equity fund inflows fell from Rs 45,325 crore in July to Rs 31,326 crore in August, a decline of nearly Rs 14,000 crore in a single month.

Money market inflows also moderated sharply from Rs 1,46,677 crore to Rs 43,407 crore, while fixed income moved from Rs 6,212 crore of inflows in July to Rs 1,468 crore of outflows in August.

Commodities, however, saw inflows rise from Rs 4,081 crore to Rs 4,800 crore, suggesting that investors continued to seek exposure to the commodity theme despite its marginal monthly decline.

The market also showed a clear preference for smaller companies. Micro-Cap gained 2.6% while Small-Cap was marginally positive, even as Large-Cap fell 4.1%.

This suggests that the weakness was not uniform across market capitalisation and that selectivity remained important.

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The broader regime therefore remains one of domestic equity pressure, selective strength in smaller companies and momentum-led pockets, while traditional defensive labels have struggled.

Globally, commodities and Latin American markets stood out, with Brazil gaining 9.9% and Global-Commodity rising 8.8%, while Korean ETFs saw some of the sharpest declines.

(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of The Economic Times)

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