Equity funds see third straight month of net inflows in May; here's what lured investors

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© Nishant Kumar Equity funds see third straight month of net inflows in May; here’s what lured investors

Equity funds saw net inflows of Rs 10,082 crore in May 2021, as healthy gains in the Indian stock market seem to have boosted investors’ confidence in these schemes, monthly data released by the Association of Mutual Funds in India (AMFI) shows. Assets under management (AUM) as on May 31 rose to Rs 33.05 lakh crore from Rs 32.37 lakh crore on April 30.

Bond funds saw net outflows of Rs 44,512 crore in May compared to net inflows—investments exceeding redemptions—of Rs 1,00,903 crore in the previous month.

With a net inflow of Rs 10,082 crore, equity-oriented mutual funds witnessed their highest monthly net inflows after February 2020, when the segment received Rs 10,795 crore.

After eight consecutive months of outflows, equity mutual funds saw net inflows of Rs 9,115 crore in March 2021. In April, equity mutual funds saw an inflow of Rs 3,437 crore.

May was the third consecutive month of net positive flows in equity funds as domestic institutional investors (DIIs) and retail investors kept the market buoyant in the last three months when FIIs were net sellers in April and May.

“Significant improvement on the coronavirus situation with daily COVID-19 cases falling consistently, along with improving recovery rate, over the last few weeks, would have provided comfort to investors,” said Himanshu Srivastava, Associate Director – Manager Research, Morningstar India.

“Good quarterly results, positive earnings growth outlook over the long-term and waning concerns of any severe impact of the second wave of the pandemic on the economy, would have also boosted sentiments. This would have prompted investors to again allocate assets towards equities,” said Srivastava.

Akhil Chaturvedi, Head of Sales & Distribution, Motilal Oswal Asset Management Company pointed out the Indian market is more broad-based now with more participants, thereby reducing volatility and vulnerability to sentiments of FIIs alone.

“We understand from the first wave of COVID-19 that these waves are short-lived and eventually economic activities will revive, giving a boost to market sentiments. Therefore, buying on dips always makes sense and

this is reflecting in the mutual funds’ sales numbers,” said Chaturvedi.

Aashish P Somaiyaa, CEO, White Oak Capital underscored a jump in net inflow in equity and equity-oriented hybrid funds is a sign of investor confidence.

Among the highest net inflows in a long time, especially if one further adds flows into index funds, are ETFs and international equity funds.

Somaiyaa pointed out that the trend of money flowing into international funds has been growing and investors need to be wary of the trend following piling more and more money into developed market technology stocks in the late stages of a multi-year boom.

The market is trading near all-time high levels. Experts point out the further direction of the domestic markets would depend on the monsoon, opening up of the economy in a phased manner and the pace of vaccination going forward.

“As states ease restrictions gradually, we expect the demand environment to get better which can have a positive impact on the markets. Technically, Nifty remains in a positive setup and can see a move towards highs of 16,000,” said Siddhartha Khemka, Head – Retail Research, Motilal Oswal Financial Services.

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