Inflows Into Equity Mutual Funds Rebound After Three Months Of Decline

Inflows into equity mutual funds rebounded after three months of decline in December as Indian benchmarks extended gains for the fourth straight month—the longest streak since August 2018.

Net inflow into equity and equity-linked schemes jumped more than threefold over the previous month to Rs 4,499.39 crore in December, according to data released by the Association of Mutual Funds in India. Investments into equity mutual funds in November had fallen to their lowest in more than three years.

An analysis of the category-wise data showed that multi- and small-cap funds witnessed a rise in investments month-on-month. While inflows into large caps fell marginally, they still attracted a bigger share of investor money among other schemes. AMFI started offering granular data of equity inflows since April, according to the guidelines of the market regulator.

“It was good to see the reversal of trend over November numbers,” Swarup Mohanty, chief executive officer at Mirae Global Investment (India), told BloombergQuint. “There is a flight to safety which is evident from the large-cap numbers. But overall, [there were] well diversified flows, which is good for the industry.”

Also, contribution through systematic investment plans rose to the highest ever level of Rs 8,518 crore in December.

“Retail investors continue to repose trust in mutual funds as reflected by continued flows through SIPs, despite challenging domestic economic scenario and global trade issues and conflicts,” NS Venkatesh, CEO of AMFI, told BloombergQuint. “Markets have rallied and indices scaled new peaks, reflecting a resolution coming through structural policies like IBC and lowering of interest rates and expectations from budget.”

Agreed Vishal Kapoor, chief executive officer at IDFC Asset Management Company. “In addition to attractive broader market valuations, there seems to be a growing expectation of strong policy action and market-friendly announcements in the upcoming budget,” he told BloombergQuint. “In the fixed income asset class, we saw a continued preference for high quality short-end categories like banking and PSU debt funds and short duration funds.”

Still, the overall mutual fund industry witnessed a net outflow of Rs 61,809.70 crore across all segments compared with an inflow of Rs 5,4419.18 crore in November. The liquid or money market category contributed the most to the total outflows as the schemes used by companies to park surplus cash for the short term witnessed quarter-end withdrawals.

Investors pulled out Rs 71,158.5 crore from the liquid funds in December compared with an inflow of Rs 6,938 crore in November.

Total assets under management rose marginally over the preceding month to Rs 27.3 lakh crore in December. Total equity AUM rose about 1 percent sequentially to Rs 7.62 lakh crore during the month.

According to Venkatesh, average AUM at an all-time high, net equity inflows trebling in the last month, continued robust SIP book and SIP AUMs at an all-time high are reflective of positive sentiment in equities.

IDFC AMC's Kapoor also said, “It was encouraging to see average AUM trending higher despite anticipated quarter-end outflows in the overnight and liquid fund categories.”