Equity Mutual Funds: Equity Fund Inflows Slow From December Peak, SIPs Hit New High

Individual investors continued to pour money into equity mutual funds in January for the eleventh consecutive month, but flows were lower than in December as sharp stock market swings prompted a increased caution. Equity programs earned ₹14,888 crore in January from ₹25,077 crore in December. Collections through Systematic Investment Plans (SIPs) hit a new high of ₹11,517 crore from ₹11,306 crore in the previous month.

Mutual funds also saw inflows of ₹5,088 crore, taking the sector’s total assets under management (AUM) to a record high of ₹38.89 lakh crore from ₹37.92 lakh crore the previous month. .

Fund officials and analysts said investors were more cautious in January. In December, the record inflows of ₹25,077 crore were also due to large inflows by three new fund offerings.

Agencies

Most equity plan categories received inflows, with flexicap funds getting the highest inflows of ₹2,527 crore, followed by sector funds at ₹2,073 crore and large cap funds at ₹1,890 crore.

“Worries about ‘new’ variants across the world, relatively high valuations and rising inflation have likely led to a reduction in the magnitude of flows over the past month,” says Kavitha Krishnan, senior analyst – manager research, Morningstar India.

The resilience in flows to equity mutual funds came despite selling off by overseas institutions, which sold shares to the tune of ₹35,975 crore in January for the fourth month in a row.

Domestic institutional investors, which include mutual funds and insurance companies, deployed ₹16,502 crore in shares during the month.

While markets were volatile for most of January due to uncertainty surrounding reduced liquidity and geopolitical risks, domestic retail flows helped Sensex and Nifty limit losses to 2% and 2.6% , respectively.

“We saw significant corrections in January due to REIT selling. However, retail investors showed resilience, continued their SIPs and used the sharp declines as an opportunity to invest in mutual funds investment,” said Anand Vardarajan, business manager at Tata Mutual Fund. .

Most equity plan categories received inflows, with flexicap funds getting the highest inflows of ₹2,527 crore, followed by sector funds at ₹2,073 crore and large cap funds at ₹1,890 crore.

Value funds saw outflows of ₹163 crore. Wealth managers have recommended flexicap and large-cap funds, as these funds focus primarily on large-cap stocks, which are expected to be more resilient in the coming months.

“We see investors maturing because they don’t buy big on a rally and panickedly withdraw money on a big drop,” said DP Singh, chief commercial officer of SBI Mutual Fund.

“They are laddering their investments, slowly taking advantage of each market downturn and taking a long-term view of equity mutual funds.”

Hybrid funds remained popular with investors in January. Dynamic asset allocation funds saw inflows of 2,763 crore while aggressive hybrid funds, which allocate 65-75% of their portfolio to equities, saw inflows of 1,844 crore. Equity savings funds, which allocate 10-40% to equities, saw outflows of 28 crores.

In debt fund categories, investors are shifting from long-term funds to liquid and very short-term funds with interest rates expected to firm. Bank debt and PSU funds recorded outflows of 2,537 crore, while short-term funds recorded outflows of 2,889 crore. Low yields in liquid funds led to outflows of 14,398 crores. Exchange-traded funds (ETFs) in gold also saw outflows to the tune of 481 crore as weakness in the precious metal over the past year dampened appetite for the asset.

Dolores W. Simon