Inflow in equity mutual funds dropped 26 per cent to Rs 29,303 crore in February, primarily due to a significant decline in investments in small and midcap schemes, amid continued market volatility. This was the second consecutive month of decline in inflow in equity funds. The latest fund infusion by investors also marks the 47th consecutive month of net inflows into the segment.
Moreover, inflows into systematic investment plans (SIP) came at Rs 25,999 crore in February, making it three months low. Before this, SIP inflow was Rs 26,400 crore in January and Rs 26,459 crore in December. “The SIP inflows have come down, but the drop is not significant, partly due to February being a shorter month as compared to January,” Suranjana Borthakur, Head of Distribution & Strategic Alliances at Mirae Asset Investment Managers (India), said.
According to data released by Association of Mutual Funds in India (AMFI) on Wednesday, equity-oriented mutual funds saw an inflow of Rs 29,303 crore in February, way lower than Rs 39,688 crore registered in January and Rs 41,156 crore in December. However, the pace of investments moderated compared to the previous month due to increased market uncertainty and a broader correction in equities.
“While short-term headwinds have tempered investment flows, domestic investor confidence remains strong, as indicated by continued inflows. Investors are adopting a cautious yet steady approach, reassessing their portfolios while maintaining long-term investment commitments,” Nehal Meshram, Senior Analyst – Manager Research at Morningstar Investment Research India, said.
Akhil Chaturvedi, Executive Director & Chief Business Officer, Motilal Oswal AMC, said that continuous monthly market correction has led to a slowdown of sales in February, this could also be partially attributed to a truncated month. Investors are being cautious in allocations and may postpone or stagger in the near future. Having said so, net sales of Rs 30,000 crore are also pretty healthy and the broader sentiment looks optimistic from a long-term wealth creation perspective.
Also, the sharp decline was attributed to reduced inflows in mid and small-cap funds, which saw a drop to Rs 3,406 crore and Rs 3,722 crore in February, compared to Rs 5,147 crore and Rs 5,720 crore in January, respectively. In large-cap funds, inflows totalled Rs 2,866 crore, down from Rs 3,063 crore in January. Within the equity categories, sectoral/thematic funds witnessed the highest net inflow of Rs 5,711 crore, followed by Flexi Cap Funds with Rs 5,104 crore.
Apart from equities, gold exchange-traded funds (ETFs) saw an inflow of Rs 1,980 crore against Rs 3,751 crore in January. However, debt mutual funds registered an outflow of Rs 6,525 crore last month in February, a sharp reversal from the strong inflows of Rs 1.28 lakh crore in the preceding month.
Despite the outflows, liquid funds saw the inflow at Rs 4,977 crore, followed by corporate bond funds (Rs 1,065 crore) and short-duration funds (Rs 473 crore). However, several short-term debt categories witnessed heavy redemptions, with ultra-short duration funds (Rs 4,281 crore), money market funds (Rs 276 crore), low-duration funds, and overnight funds (Rs 2,264 crore) seeing the highest outflows. Together, these four categories accounted for 90 per cent of total redemptions, Meshram said.
Of the 16 debt categories, 10 recorded net outflows, indicating that the bulk of redemptions were concentrated in short-duration funds. Overall, mutual funds attracted over Rs 40,000 crore in the month under review compared to a staggering inflow of Rs 1.87 lakh crore in January suggesting a cautious approach from investors in the mutual funds space.
This slump in inflow has pulled the overall assets under management of mutual funds down 4 per cent to Rs 64.53 lakh crore in February-end compared to Rs 67.25 lakh crore in the preceding month. This comes in the backdrop of global uncertainties and macroeconomic factors, which led to a slump in benchmark index Sensex by 5.5 per cent in the month.
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The impact of the turbulence in the markets showed in the inflow in the equity-oriented mutual funds where investments of Rs 29,303 crore in February was dramatically below the Rs 39,688 crore recorded in January and Rs 41,156 crore in December, AMFI (Association of Mutual Funds in India) data showed. Biz News Business News – Personal Finance News, Share Market News, BSE/NSE News, Stock Exchange News Today
