Equity Mutual Funds See Highest Inflows Since March 2020

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Equity mutual funds saw inflows for the third straight month as the stock market optimism defied a resurgence in Covid-19 infections and its impact on the Indian economy. Debt schemes, however, drove overall outflows for the industry in May.

Net inflows into equity and equity-linked schemes jumped nearly threefold over the preceding month to Rs 10,083 crore in May, the highest since March 2020, according to data released by the Association of Mutual Funds in India.

That came as India’s equity benchmarks — Nifty 50 and BSE Sensex — gained close to 6.5% during the reported month. The stock markets rallied even as the nation reported record fresh Covid-19 cases and deaths, forcing several states to impose local lockdowns.

Category-Wise Trends

Large-, mid- and small-cap funds witnessed net inflows for the third straight month, while multi-cap schemes flows turned positive after two months of outflows. AMFI started offering granular data starting April 2019.

Contributions to systematic investment plans rose to Rs 8,819 crore in May against Rs 8,596 crore in April.

Net Flows

All mutual fund schemes, debt and equity, saw a net outflow of Rs 38,602 crore in May, with average assets under management at Rs 32.99 lakh crore.

In outflow was driven by liquid funds—used by companies to park short-term cash. This category saw a net Rs 45,447-crore outflow. Overnight funds too witnessed a net outflow of Rs 11,573 crore compared with an inflow of Rs 18,492 crore in April.

The large withdrawals could be due to cash flow management by companies, AMFI said in its conference call. June could also see some withdrawals due to tax outgo, AMFI said.

Credit risk funds, however, saw net inflows of Rs 258.3 crore. Investors have been pulling out of such funds every month at least since April 2019, barring January this year.

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