Equity Mutual Funds see net inflows after 8 months as tide turns

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After eight months of net outflows, equity mutual funds attracted net inflows of 7,376 crore in March, with all categories of open-ended funds barring multi-cap, value and contra funds reporting inflows.

Closed-ended equity schemes, however, saw net outflows of 1,739 crore due to maturing of close-ended schemes, data released by the Association of Mutual Funds of India (Amfi) showed. Out of the total net inflows, systematic investment plans accounted for 9,182 crore in March, a substantial jump over February’s 7,528 crore.

Total flows into equity funds were the highest since March 2020. However, according to N.S. Venkatesh, chief executive officer (CEO), Amfi, some of these inflows were due to holidays at the end of February, which shifted flows of around 500 crore to March.

Open-ended debt mutual funds, on the other hand, saw net outflows of 52,528 crore, led by short-term debt categories like liquid funds, ultra-short duration funds, low duration funds, money market funds and short duration funds. Some of these outflows are seasonal, as corporate treasuries pull out funds to pay advance tax in March.

There were, however, positive flows of 956.92 crore in close-ended debt funds, mostly driven by launches of fixed maturity plans. Banking and PSU debt funds saw net outflows of 6,508 crore, some of it likely due to the recent uncertainty over additional tier-1 (AT-1) bonds, Venkatesh said. A Sebi circular on AT-1 bonds last month had created fear of schemes with such bonds having to value their holdings lower after treating them as having a maturity of 100 years.

However, in a subsequent circular, the regulator allowed mutual funds to gradually move towards the 100-year rule.

March also saw the launch of debt index funds, which attracted net inflows of 2,126 crore. Apart from equity and debt, open-ended hybrid funds also saw net inflows of 6,210.05 crore, led by arbitrage and balanced advantage funds.

“People are coming to terms with the new market levels,” said Swarup Mohanty, CEO, Mirae Asset Mutual Fund, suggesting greater investing comfort with market valuations after the Covid-19 outbreak.

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