Positive sentiments and rally in the equity markets continued to attract investors into equity-oriented mutual funds in October 2021 as well. However, the quantum of net inflows dropped from September. This could be a result of investors booking profits with markets trading near all-time highs. Also, many investors would have chosen to stay on the sidelines given higher valuations. This is evident as the fund mobilised fell from Rs 36,656 crore in September to Rs 28,671 crore in October.
“The resumption of business activities and pick up in the vaccination drive have improved growth outlook. This has aided the markets to touch new all-time highs on expectation of economic recovery, thereby sidelining the risk of a possible third wave of the pandemic and other concerns in the interim. This secular bull run in the markets and high returns have attracted several investors towards equity mutual fund, as a means, to participate and benefit from the rally in the equity markets,” said Himanshu Srivastava, Associate Director – Manager Research, Morningstar India, commenting on AMFI monthly data for October ’21.
“Relatively lower returns from traditional investments have also made equity mutual funds an attractive investment destination for investors. Additionally, with the SIP book growing consistently, equity-oriented funds have been receiving robust flows since March 2021,” he added.
This was the eight consecutive month of net inflows into equity-oriented funds. Since March this year, the segment has received a net inflow of Rs 73,766 crore, thus highlighting the positive sentiments among investors. Before that, equity-oriented funds witnessed net outflows for eight consecutive months from July 2020 to Feb 2021 loosing Rs 46,791 crore. Clearly the trend has now reversed.
Except for Dividend Yield and ELSS categories, all the other equity categories witnessed net inflows in October. NFOs also continued to garner strong interest from investors. Passively manged funds continue to attract investor interest on the back of sharp rally in the equity indices. During the month 4 index funds and 3 Other ETFs funds were launched which cumulatively accumulated Rs 1,119 crore. Consequently, Index Funds and Other ETFs category received net inflow of Rs 3,514 crore and Rs 5,427 crore, respectively.
“Sector/thematic funds continue to attract investors with most of them capitalising extensively from the recent market rally. However, investors need to be judicious while investing in these funds as they are cyclical in nature and tend to carry higher risk than a regular diversified equity funds. These funds are for investors who have the understanding of the underlying sector or have right guidance available to make informed investment decision,” informed Srivastava.
Given the broad-based rally in the markets, investors continue to invest in Flexi Cap Funds to capitalise from the investment opportunities arising across market segments viz., large cap, mid cap and small cap.