Equity mutual fund schemes saw inflows of Rs 6,480 crore in April, down by a third from the previous month and 47% lower than the average of the previous 12 months, according to data from the Association of Mutual Funds in India (Amfi). The inflows are also the lowest since November last year.
However, this was the 26th consecutive month of inflows in the equity mutual funds.
Large-cap funds were hit the most, witnessing a drop to Rs 53 crore in April from Rs 911 crore the previous month. Net inflows into small and mid-cap funds remained relatively stable at Rs 2,182 crore and Rs 1,782 crore, respectively compared to Rs 2,430 crore and Rs 2,128 crore a month ago.
“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 in equities,” said Himanshu Srivastava, associate director – manager research, Morningstar India.
G Pradeepkumar, CEO, Union Asset Management Company said: “It is encouraging that the flows have remained positive in April. Historically, April is a relatively quiet month after the hectic activity in March. We are confident that the momentum will pick up in the coming months.”
Interestingly, inflows during April in the last few years have been rather volatile. While April 2022 saw inflows of `15,890 crore, in April 2021 and 2020, inflows stood at `3,437 crore and `6,213 crore, respectively. However, April 2020 was the time when the Indian stock market was going through turmoil due to the Covid crisis and investment sentiment was rather weak.
While overall inflows fell by a whopping 68%, monthly systematic investment plans’ (SIPs) contribution dipped marginally to `13,727 crore and the number of new SIPs registered in April stood at 1.9 million. Mutual fund folios reached an all-time high of 146.4 million, with retail scheme folios at 116.9 million, also a record high. Nine schemes were launched, all in the open-ended category, raising a total of `1,828 crore.
NS Venkatesh, chief executive, Amfi said: “We are delighted to witness encouraging growth in the mutual fund industry in India. Investors have continued to invest in mutual funds through SIPs, which is a positive sign.”
Venkatesh added that Amfi expects gross monthly inflows through systematic investment plans to reach `17,000-18,000 crore per month by the end of the fiscal year, indicating substantial growth potential. “Investors must stay invested for the long term without getting swayed by market movement,” he added.
The benchmark indices gained 3.6% in April. A steady decline in crude oil prices, earnings of major companies on expected lines, a potential pause on further interest rate hikes and commentary by the IMF, hinting the Indian economy is expected to grow at the fastest rate in the world, were some of the positives.
In the hybrid fund category, arbitrage funds — which aim to generate profits by exploiting price differences of the same underlying assets in different segments — saw net inflows of `3,716 crore. The hybrid category saw total outflows of `3,317 crore.
Debt funds saw inflows of `1.06 trillion, led by categories having shorter maturity profiles.
“Investors 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 could take regarding interest rates, going ahead. Floater funds also received good net inflows given their ability to withstand changing interest rates scenario,” said Srivastava.
Net assets under management for the industry stood at `41.6 trillion as on April 30, 5.5% higher than that in the previous month.