Equity mutual funds recorded inflows of Rs 9,115 crore in March, breaking eight-month losing streak, as investors may have entered equities on dips. Barring two - Multi Cap Fund, Contra Fund -- rest of the equity categories received positive flows.
"While it's too early to draw conclusions, it seems equity investors waiting on the sidelines for a market correction, have started making allocations taking a long-term investing view in equities, as should be the case. Additionally, the quantum of redemptions were lower for the month, suggesting profit booking/reallocation to other asset classes slowed down," says Kaustubh Belapurkar, Director - Manager Research, Morningstar andar bahar game.
While the core categories like Large Cap, Flexi Cap & Mid Cap received reasonable inflows, thematic funds, led by ESG received significant inflows, points out Belapurkar.
The equity category had witnessed a net outflow of Rs 4,534 crore in February 2021.
For the financial year 2020-21, equity fund flows remained net negative as outflows persisted from July 2020 to February 2021. The outflows were triggered by a bounce-back in the market post Covid crash that drove investors to book profits or rebalance their portfolios.
The month of January saw an outflow of Rs 9,253 crore followed by Rs 10,147 crore in December, Rs 12,917 crore in November, Rs 2,725 crore in October, and Rs 734 crore in September, Rs 4,000 crore in August and Rs 2,480 crore in July, which was their first withdrawal in over four years.
Meanwhile, number of SIP accounts grew by nearly 3 per cent to 3.72 crore compared to 3.62 crore in February. The Assets Under Management (AUM) in SIPs grew by Rs 6,378.63 crore to Rs 4,27,916.22 crore. It stood at 4,21,537.59 crore at the end of February.
Debt mutual funds were hit hard as investors pulled out Rs 52,528 crore in March after investing Rs 1,735 crore in February. Liquid Fund (-19,383.68 crore), low duration fund (-15,847.34 crore) and short duration fund (-9,025.14 crore) recorded highest outflows.
"Funds at the shorter end of the curve (Liquid, Low Duration, Ultra Short Duration, Money Market) witnessed outflows as is typically observed during quarter end. Banking & PSU funds witnessed a fair bit of outflows as a result of the new guidelines around valuations and fund exposure norms for AT1 bonds. Floater funds continue to receive net positive flows given the limited probability of interest moving down significantly," says Belapurkar.
The trend remained positive for the financial year 2020-21. "FY 20-21 witnessed a significant amount of net flows into fixed income funds, typically at the shorter end of the curve as well as categories with cleaner credit profiles such as Short Duration, Corporate Bond & Banking & PSU. Categories such as Credit Risk and to a certain extent Medium term where many funds had lower credit exposures have witnessed outflows," explains Belapurkar.
Gold continues to appeal to the investors as it witnessed a total inflow of Rs 662 crore in March compared to Rs 491 crore in February.
Investors are steadily acknowledging the need for adding gold as a diversifier in portfolios, says Belapurkar.
"During the challenging investment environment over the last few years, gold emerged as one of the better performing asset classes, thus proving its effectiveness in investors' portfolio. Expectedly, this has attracted investors interest," he adds.
The overall AUM of the mutual fund industry slipped marginally to Rs 31.43 lakh crore in March-end, compared to Rs 31.64 lakh crore in February-end.