Inflow in equity mutual funds drop 68% in April to Rs 6,480-crores

Inflow in equity mutual funds plunged by 68 per cent to Rs 6,480 crore in April over the preceding month, as investors took a "wait and watch" approach in allocating additional investments to the category. However, this was also the 26th consecutive month of inflow in the equity class, which was primarily driven by fund infusion in small-cap and mid-cap categories, data released by the Association of Mutual Funds in India (Amfi) showed on Thursday.

Overall, the 42-player mutual fund industry witnessed a sharp turnaround in April as it attracted Rs 1.21 lakh crore, on huge contributions from debt-oriented schemes, after seeing an outflow of Rs 19,263 crore seen in the previous month. Debt funds saw a net infusion of Rs 1.06 lakh crore following an outflow of Rs 56,884 crore in the preceding month.

The sharp inflow led to the asset under management of the 42-player industry rising to Rs 41.62 lakh crore as of April-end from Rs 39.42 lakh crore at the end of March. Going by the data, equity mutual funds attracted Rs 6,480 crore in April as compared to a record inflow of Rs 20,534 crore registered in the preceding month.

"We believe since March witnessed good inflows in equity. Investors probably took a wait-and-watch approach to allocate additional investments to equity in April while continuing with their existing SIPs (Systematic Investment Plans)," Manish Mehta, National Head and Sales, Marketing & Digital Business, Kotak Mahindra Asset Management Company.

"The rise in valuations could have made investors stay away from fresh investments or take off some money to take advantage of the rally in the market," Sriram BKR, Senior Investment Strategist at Geojit Financial Services, said.

Akhil Chaturvedi, Chief Business Officer at Motilal Oswal AMC, said that inflows have reduced in April compared to March due to the recent rally in the markets, thereby reflecting the cautious stance by investors.

The National Stock Exchange's benchmark index Nifty 50 rose 4 per cent in April. Moreover, fund collection through SIPs dropped to Rs 13,727 crore last month from a record Rs 14,276 crore in March.

NS Venkatesh, Amfi Chief Executive, continues to be positive on SIP flow and expects that monthly inflow through the route will reach Rs 17,000-18,000 crore per month by the end of the fiscal year.

Within equities, the small-cap category and the midcap category once again led the charge receiving flows of Rs 2,182 crore and Rs 1,791 crore, respectively.
Though flows across equity categories have reduced since the turn of the year, none of the categories witnessed net outflows except the Focused equity category which saw an erosion of Rs 131 core from its coffers.

"Given the sharp uptick in the markets seen recently, investors may have chosen to be on the sidelines and wait for a more opportune time to invest into equities," Himanshu Srivastava, Associate Director - Manager Research, Morningstar India, said.

Equity schemes have been witnessing net inflow since March 2021. Before this, these schemes had witnessed outflows for eight months from July 2020 to February 2021, losing Rs 46,791 crore.

"Notably, Midcap and Smallcap schemes showed YoY growth of 15 per cent  and 27 per cent  respectively, which was quiet healthy compared to overall equity linked schemes which degrew significantly.  Another interesting observation was 95 per cent  YoY growth in debt-oriented schemes which registered an inflow of whopping Rs 1,06,677 crores enabling industry AUM to cross 41 lakh crores for the first time. This segment attracting such inflows despite LTCG being taken away in the previous month is a strong indication of what is lying ahead," said Viraj Gandhi, CEO, SAMCO MF. 

Within the debt funds, all the categories witnessed net inflows except for credit risk and Banking and PSU Fund segments. Expectedly, categories having shorter maturity profiles were the biggest beneficiaries.

Liquid funds received the highest net inflows of Rs 63,219 crore during the month followed by money market fund (Rs 13,961 crore) and ultrashort duration fund (Rs 10,663 crore) category.
"After meeting the tax liabilities of the last financial year in March, corporates would have parked their excess investible money in liquid fund and ultra-short duration fund categories, for a short period, thereby leading to huge inflows in these categories," Srivastava said.

Also, investors would have preferred to invest in categories with shorter maturity profiles, such as low duration, money market and short duration funds since there is still some degree of uncertainty over the direction that the Reserve Bank of India (RBI) could take with respect to interest rates going ahead, he added.

Apart from equity and debt funds, other schemes -- index funds, gold exchange-traded funds (ETFs), other ETFs and Funds of funds investing overseas -- saw an inflow of Rs 6,945 crore. This was mainly driven by other ETFs, which contributed Rs 6,790 crore alone. However, Funds of funds investing overseas witnessed a net withdrawal of Rs 117 crore.

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