A surge in inflows into sectoral/thematic funds pushed net equity mutual fund (MF) flows to a nine-month high of Rs 15,686 crore in February, up 25% from January.
Data from the Association of Mutual Funds in India (Amfi) show that inflows into sectoral/thematic funds jumped 3.2x, from Rs 903 crore in January to Rs 3,856 crore in February. The smallcap and multicap categories also showed higher inflows, registering Rs 2,246 crore and Rs 1,977 crore, respectively.
NS Venkatesh, CEO of Amfi, said: “Two new fund offers (NFOs) mobilised about Rs 2,540 crore, which led to heavy inflows into thematic funds.” He said investors are flocking to sectoral/thematic funds as they seek value creation. He said sectors such as banking, financial services, and pharmaceuticals had seen large bets.
Also read: Best Small Cap Funds: Top-performing mutual fund schemes with double-digit returns in 5 years
SIP flows came in at Rs 13,686 crore, registering close to a Rs 170-crore drop from January’s Rs 13,856 crore. “Due to February having only 28 days, there was a dip in SIP contribution as flows were not recorded for the full month of 31 days,” said Venkatesh.
Index funds, too, recorded healthy inflows at Rs 6,244 crore, up from Rs 5,813 crore in January. According to Venkatesh, multiple NFO launches in thus category helped boost inflows. He added that these are passive funds, and investors are moving towards these as they are low-expense products and provide stability in times of volatility.
Net assets under management for the industry stood at Rs 39.46 trillion as on February 28, while the average AUM for the month stood at Rs 40.68 trillion. Retail AUM for equity, hybrid, and solution-oriented schemes stood at Rs 20.27 trillion for February, with an average AUM of Rs 20.69 trillion.
“February was interesting as markets corrected based on concerns around rate hikes, high inflation, geopolitical tensions, and signs of a global slowdown. A weakening rupee also put additional pressure. Despite the fall, investors’ overall preference towards investing in dips is evident. Domestic investors continue to place confidence in the market, as broader economic indicators remain favourable towards the India growth story,” said Kavitha Krishnan, senior analyst – manager research, Morningstar India.
Debt schemes continued to see an exodus of funds, with the category registering over Rs 13,800 crore of outflows. Rising interest rates continue to make investors jittery as they pulled out Rs 11,304 crore from liquid funds. This was largely on account of withdrawals by banks and corporates for treasury management.
Also read: Best ELSS Tax Saving Mutual Funds: 10 schemes with over 12% returns in 5 years
The low and short-duration funds saw outflows of Rs 1,904 crore and Rs 2,430 crore, respectively. There was an inflow of Rs 2,946 crore into overnight funds.
“With the central bank’s focus on moderating inflation, the monetary policy has been tailored to ensure a disinflation process. Despite expectations around the February rate hike of 25 bps likely being among the last, investors are yet to see evidence of this. This led to investors looking at funds with a shorter duration as these offer lower volatility. Moreover, an increased focus towards other asset classes, and the opening-up of newer avenues have also likely led to investors preferring these over debt fund categories,” said Krishnan.