Equities rally, SIPs flow in, next a rerating for AMCs | Economic Times

Mumbai: With a 21% growth in assets under management between March and August aided by strong equity flows and improving systematic investment plans (SIP) books, asset management companies are headed for strong re-rating, say analysts.Net inflow from equity funds so far in FY22 was Rs 45,000 crore, compared with a cumulative outflow of Rs 43,400 crore in FY21. Among the listed AMCs, Nippon Life has grown equity AUM by 18% between March and August, while UTI AMC and HDFC AMC reported growths of 23% and 12%, respectively, in the period."We expect asset management plays will benefit from the improving equity mix for the third successive quarter in July-September 2021," said Ansuman Deb, analyst, ICICI Securities. "Factoring in the April-August performance, relative cost structures, and return on equity, we upgrade FY23 earnings estimates for Nippon Life by 12%, UTI AMC by 20%, and HDFC AMC by 2%." 86443989Three listed AMCs - HDFC, Nippon Life, and UTI - have an equity AUM market share of 12.1%, 6.8%, and 4.8%, respectively. Equity mutual fund schemes witnessed inflows for the sixth consecutive month in August, amounting to Rs 26,900 crore, backed by new fund offers of Rs 21,800 crore. Arbitrage funds saw net inflows of Rs 1,800 crore. SIP inflows were robust at Rs 9,920 crore."The sharp inflow so far in FY22 essentially indicates that investors are coming back to mutual fund products, which is also aided by sharp improvement in NAV performances of mutual funds and increased market volatility. We maintain our positive stance on HDFC AMC and NAM," said Binod Modi, head strategy at Reliance Securities. UTI, which rallied 40% in three months, is still trading at a valuation of 23 times FY23 estimated PE, which is a discount of 44% and 32% to HDFC AMC and Nippon, respectively."The company warrants a structural re-rating to 31 times FY23 estimated EPS, a 27% discount to Nippon which would mean a target price of Rs 1,400," said Gaurav Jani, analyst, Centrum Broking. "Nippon Life has constantly been paying a healthy dividend to its shareholders, and we feel that investors can buy the stock at current levels and add on dips to ₹390 for base case fair value of Rs 478 and the bull case fair value of Rs 505 over next six months," said Nisha Sankhala, analyst, HDFC Securities.