While debt funds saw sharp outflows, equity funds surprised the industry as it saw net inflows of Rs 11,722.74 crore in March — the highest in the current financial year.
Mutual funds witnessed net outflows of Rs 2.12 lakh crore in March 2020, which is the highest since September 2018. However, net inflows into equity schemes of mutual funds remained steadfast at Rs 11,722.74 crore despite the sharp fall in the markets during the month over the spread of the novel coronavirus.
Outflows from the mutual fund industry were largely led by open ended debt-oriented schemes, which saw net outflows of Rs 1.94 lakh crore, shows data from the Association of Mutual Fund in India (Amfi). In March, among the open-ended debt-oriented schemes, liquid funds saw the highest outflows at Rs 1.10 lakh crore followed by ultra-short duration funds and money market funds which saw outflows of Rs 29,052.98 crore and Rs 27,402.30 crore respectively. A Balasubramanian, managing director and CEO for Aditya Birla Sun Life AMC, says, “Last month redemptions in the fixed income schemes were mainly because of volatility in the fixed income market and also the fear that the lockdown may have liquidity issue.” He also added that debt fund flows will come back to the industry in this month.
In September 2018, the mutual fund industry had seen outflows of Rs 2.30 lakh after the IL&FS crisis. Market participants say that typically, redemptions from the debt schemes occurs at the end of every quarter as institutions such as banks and corporates redeem their investments to pay for quarterly advance taxes. However, this time the outflows were much sharper compared to the previous few quarters due to the overall concern over the novel coronavirus. “This time we saw several of the institutional investors redeeming money from liquid funds and money market funds to meet their short-term expenses like salary and wages due to the lock-down in the country,” said a head of fixed income from a leading fund house.
While debt funds saw sharp outflows, equity funds surprised the industry as it saw net inflows of Rs 11,722.74 crore in March — the highest in the current financial year. Even inflows through systematic investment plans (SIPs) stood at Rs 8,641 crore in March 2020. All the categories in equity-oriented schemes saw net inflows barring dividend yield funds, which saw outflows of Rs 29.09 crore. Multi-cap and large-cap funds continued to see positive flows of over Rs 2,000 crore each in March.
Swarup Mohanty, chief executive officer of Mirae Asset Global Investments (India), says, “Investors have shown immense maturity in such times and are buying when they are seeing value in the market. They believe that this is a medical crises and world will find a solution to the Covid-19 and that is the reason they have continued to show faith in equity funds.” In March, the Sensex was down by 23.05% as foreign investors pulled out money from equity markets on the fear of the novel coronavirus.
However, the hybrid scheme category saw outflows of Rs 36,459 crore because of arbitrage funds. The data from Amfi also shows that net assets under management of the industry as in March stood at Rs 22.26 lakh crore compared to Rs 23.79 lakh crore in March last year.