Home / Markets / Stock Markets /  JM Financial upgrades HDFC Mutual Fund, Nippon Life AMC stocks to 'Buy' rating

JM Financial Research has upgraded its outlook on shares of mutual fund houses given the sharp rally in equity markets since Mar-20 lows. "We are upgrading both HDFC AMC and Nippon Life India Asset Management (NAM) to BUY with revised target prices of 2,565 and 290, respectively," says JM Financial in its research report. However any sharp deterioration incrementally in fund performances or prolonged period of outflows is a key risk to the research company's estimates. Nifty 50 has gained 31%, Nifty 100 has grown by 30% and Nifty 500 has gained 33% since March 31.

JM Financial had downgraded its view on AMCs in November 2019 as a whole given the rich valuations at that time.

HDFC AMC closed at 2,280 on Thursday and Nippon AMC closed at 266. JM Financial expects a 29% increase in HDFC AMC's equity AUM and a 34% rise in assets of Nippon AMC.

JM Financial Research expects equity inflows to remain muted given

a) overall weak economic environment,

b) relatively sub optimal equity returns for investors who entered during the liquidity gush post demonetisation and

c) recently increased appetite for direct equity exposure (vs through MF route).

"Our estimates now build 30% market action for Equity AUM for FY21E, while we build 49%/50% decline in net equity inflow for these two companies resulting into 29%/34% YoY AUM growth for HDFC AMC / NAM," says the report.

With respect to debt AUM, JM Financial believes that after three years of net outflows industry seems to be witnessing net inflow year in FY21E given benign liquidity and rally in G-sec segment.

"We build 16%/15% YoY growth for debt AUM for HDFC AMC / NAM respectively. Consequently, We are building an overall AUM growth of 22% / 25% YoY for for HDFC AMC / NAM respectively.

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