Equity mutual funds inflows up 16% MoM in May, SIP contribution above Rs 12,000 crore

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Inflows into equity mutual funds jumped 16% month-on-month to Rs 18,529.4 crore in May, even as the sentiment in the equity markets remained muted amid elevated inflation, geopolitcal unrest and sustained foreign fund outflows. Flows into equity-oriented schemes have held up across the board, data from the Association of Mutual Funds in India (Amfi) show.

According to the data released by Amfi, all the 11 categories in equity funds witnessed positive flows in May, with the large cap fund witnessing inflows of Rs 2,485.37 crore.

In the hybrid category, arbitrage funds attracted inflows of Rs 1,007.37 crore and dynamic asset allocation witnessed inflows of Rs 2,247.87 crore.

Sustained flows through systematic investment plans show that the retail investor is holding up the benchmarks. The number of SIP accounts stood at an all-time high of  5.48 crore in May, against 5.39 crore in April, indicating a steady growth in retail participation. Contribution from systematic investment plans (SIPs) was at Rs 12,286.42 crore in the month under review, against Rs 11,863 crore in the previous month.  

According to Akhil Chaturvedi, chief business officer, Motilal Oswal AMC, “I believe the consistent SIP flows are supporting the net positive sales numbers in equities. Through the on-going volatility, we see continued interest among retail investors to allocate to equity MFs. The spread of new flows is well diversified across categories (large cap/mid cap/flexi-cap).

Dynamic/balanced advantage funds as a category continue to be positive and this is very good for retail investors in managing risks and volatility.”

NS Venkatesh, chief executive at Amfi, said, “Despite the markets being very volatile and the interest rate hikes by the central bank happening to fight inflation, we are still seeing good numbers in mutual funds, especially in equity MFs.” The retail investor’s confidence in equity as an asset class stems from the fact that the India growth story continues to be promising and intact relative to other major economies.

However, overall, the mutual fund industry saw net outflows of Rs 7,532.54 crore in May, against inflows of Rs 72,846.9 crore in the previous month. This was largely due to heavy redemption in debt schemes after the recent rate hike by the Reserve Bank of India (RBI). “The overall outflows were due to debt-oriented schemes and investors pulled out from these funds because of rate hikes by the central bank,” Venkatesh told reporters on Thursday.

After inflows of Rs 54,750 crore in the previous month, debt-oriented schemes saw outflows of Rs 32,722.5 crore in May – weighed by outflows of Rs 14,598 crore in money market funds and Rs 8,600 crore in short duration funds. Venkatesh said the 50 bps rate hike by the RBI will further have an impact on debt schemes in the short term.

Overall, assets under management (AUM) fell over 3% MoM to Rs 37.3 trillion in May, compared with Rs 38.8 trillion in April. The net AUM declined to Rs 37.2 trillion from Rs 37.56 trillion in April.

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