Equity mutual funds witnessed a 16 percent drop in inflows at Rs 22,633.15 crore in March against Rs 26,865.78 crore in February this year, showed data released by the Association of Mutual Funds of India (AMFI) on Wednesday.
The drop in inflows into equity mutual funds was also on account of investors pulling money out of small cap funds on a net basis for the first time in the last 30 months, according to the AMFI data.
Barring small cap funds, all funds in the equity category logged net inflows in March 2024. Small cap funds witnessed net outflows to the tune of Rs 94.17 crore against inflows of Rs 2,922.45 crore.
Large cap equity funds
Large cap funds registerd net inflows of Rs 2,127.79 crore in the month under review against Rs 921.14 crore inflows in February 2024, showing a rise of 130 percent month on month. Largecap fund inflows in March improved to sixth best in five years.
Large and midcap funds
Similarly, large and midcap funds saw their best performance in about five years in March 2024, with inflows coming in at Rs 3,215.58 crore against Rs 3,156.64 crore in the previous month.
In the midcap equity funds segment, the momentum slowed a bit in march with net inflows dropping to Rs 1,017.69 crore from Rs 1,808.18 crore in February.
ELSS funds category
ELSS funds again saw net outflows of Rs 57.55 crore in March against Rs 26.16 crore outflows in February 2024.
Debt funds
In the debt-oriented mutual fund category, outflows were the highest at Rs 1,98,298.90 crore in March against inflows of Rs 63,808.82 crore in February.
“March saw some interesting changes in MF flows. The entire debt category was negative across with the exception of long duration funds. Usual balance sheet build up in the year-end led to outflows in the liquid ultra-category. Tight liquidity situation led to outflows despite short-term yields peaking led to outflows. Quarterly seasonality of tight liquidity coinciding with the year-end led to even more pronounced outflows,” said said Anand Vardarajan, Business Head – Banking, Institutional Clients, Alternate Products and Product Strategy, Tata Asset Management.
“Equity net flows dipped led by a fall in flows in small and midcap category. The stress test results in the small and midcap space coupled with high valuations could be the reason for flows to ebb here. There is a slight rotation we are seeing where large cap and predominantly large cap funds like flexi cap or large and mid have benefited in flows at the margin as investors may be moving in here due to relative valuation comfort,” he added.
Hybrid category and particularly multi asset has seen flows. It is palpable to see asset allocation funds like multi asset or hybrid finding favor as clients may be taking fresh guard of their allocations. Arbitrage which has seen the strongest inflows in the hybrid category took a pause in the month of March.