Equity MF inflows at 5-month low in April

According to the data, open-ended equity MF schemes saw inflow of ₹6,480 crore in April, down 68% from March. “We believe since March witnessed good inflows in equity, investors probably took a wait-and-watch approach to allocating additional investments into equity in April while continuing with their existing systematic investment plans (SIPs),” Manish Mehta, national head of sales, marketing and digital business at Kotak Mahindra Asset Management Co. said.

Experts said inflows was also driven by new fund offers and hence the decline in April was being anticipated. Also, equity MFs saw a rise in redemptions to ₹17,484.65 crore, compared to ₹16,612.49 crore in March.

Having seen lower-than-expected returns from equity MFs during the last one year, investors who were sitting on the sidelines resorted to booking profits as returns came into positive territory during April, said DP Singh, chief marketing officer, SBI Mutual Fund.

There was significant inflow at the end of March as investors wanted to invest before a change in regulations, therefore inflows got frontloaded, Singh added.

That said, April typically sees a dip in inflows; there was a 45% decline in equity mutual fund inflows in April 2022 as well. However, the decline in 2023 was sharper, primarily due to front-loading of investments, rise in new fund offers in March and a rise in redemptions.

SIP accounts stood at 64.23 million in April, compared to 63.59 million in March. Total SIP assets under management (AUM) were at ₹7.17 trillion in April, compared to ₹6.83 trillion in March. Monthly contributions at ₹13,727.63 crore in April was, however, lower than ₹14,276 crore in March, but were significantly higher than ₹11,863 crore in April 2022. SIP flow remains stable and is gradually growing, therefore, some month-on-month variation in flows is not a matter of concern, analysts 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,” said N S Venkatesh, chief executive, AMFI.

Venkatesh 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.

Meanwhile, debt mutual funds — both open-ended and closed-end schemes — saw a significant rise in net inflows to ₹1.05 trillion during April. The funds had seen outflows worth ₹ 54,472.37 crore during March 2023. The rising investments in ultra-short duration funds and liquid funds led to this rise.

Experts said rising interest rates have led to rising investments in debt funds. It remains a tactical move and is not a broad-based trend, said SBI mutual fund’s Singh. Analysts said institutional investors and corporates may have parked their funds feel analysts.

Viraj Gandhi, chief executive of SAMCO Mutual Fund said that the current interest rate cycle showing signs of peeking out and inflation data showing some relief, must be the reason for such high traffic towards debt schemes.

The growth in debt schemes was the key reason that enabled industry AUM to cross ₹41 trillion for the first time, added Gandhi. In equity schemes, midcap and smallcap schemes showed year-on-year growth of 15% and 27% respectively, quite healthy compared to overall equity schemes which saw a significant decline, highlighted Gandhi.

Mutual fund industry net AUM stood at ₹41.6 trillion during April, while average AUM was at ₹ 41.5 trillion in the same period.