Profit booking, fewer NFOs drags equity inflows by 61.62% to Rs 8,666.68 crore in August

With benchmark equity indices trading at all-time highs, investors are busy booking their profits in equity-oriented mutual fund schemes. According to data released Amfi (Association of Mutual Funds in India) on Wednesday, the net inflows of open-ended equity mutual funds nose dived by 61.62% to Rs 8,666.68 crore in August 2021 compared to Rs 22,583.52 crore in July 2021. Investors are booking profits is visible from the fact that the redemptions for open-ended equity mutual funds stood at Rs 25,002.08 crore one of the highest in 2021.

“Whenever people see profits on the table they would like to take it and they are doing that. But at the same time, there are inflows of Rs 33,668.76 crore which shows that investors have not lost faith in equity mutual funds. So it is investors are taking one-off profits and reentering a fresh,” explained N. S. Venkatesh, Chief Executive of AMFI

Apart from profit-booking, the other reason for the fall in net inflow could be attributed to the lesser number NFOs in August 2021. In July some 28 NFOs (new fund offerings) hit the market and of these three schemes cumulatively collected around Rs 13,700 crore.

The other element in the monthly data was that Flexi cap funds are becoming the favourite of investors as they received 55% of net inflow (Rs 4,741.22 cr) in open-ended equity-oriented schemes. While focused funds garnered around Rs 3,072.77 cr in August 2021.

Hybrid funds continue to be in flavour

Hybrid funds continued to be in demand as all hybrid schemes put together saw a net inflow of Rs 18,705.84 crore which was more than double of all open-ended equity schemes put together. However, on monthly basis, there was a dip of 3.98% or Rs 775 crore in net inflows of hybrid schemes which stood at Rs 19,481.07 in July 2021.

Among the hybrid schemes, Dynamic Asset Allocation or Balanced Advantage Fund were the most preferred as it saw a net inflow of Rs 16,570.97 crore led by SBI MF collecting a whopping Rs 15,000 crore from over four lakh investors through its Balanced Advantage Fund NFO of last month.

“A granular look at the data of equity and balanced/balanced advantage category of schemes suggests that the gross flow, the redemption and the net flow for the months of July and August remains to be at the same elevated level. But there is significant shrinkage in the net flow for the equity category and a corresponding bump up in the net inflow of the balanced advantage category. This leads one to believe that on aggregate industry level large balanced advantage NFO has garnered a lot of traction by way of switches from equity to balanced advantage category. From a retail investors’ perspective in the short term it may not be a bad development given elevated market levels and generally lower risk perception of balanced advantage funds,” said Aashish Somaiyaa, Chief Executive Officer of White Oak Capital

SIPs on a record-breaking spree

The contributions under the systematic investment plan (SIP) continued to break records for the fourth month in a row as it touched lifetime highs of Rs 9,923.15 in August 2021 compared to Rs 9,608.86 crore in July 2021.

“As lower interest rates on traditional investments and a rising equity market seems to have encouraged a lot of investors to turn towards mutual funds. Despite the concerns around the third wave of Coronavirus, the markets have been on an uptrend as a vast majority of the sectors remained in the green. The record flows into NFO’s combined with a stable SIP book have largely contributed to the flows,” said Kavitha Krishnan, Senior Analyst Manager Research at Morningstar India.

Even the number of SIP accounts came in at record highs in August 2021 witnessing a net addition of 15.16 lakhs accounts taking the tally of accounts to 4.32 crore accounts versus 4. 17 crore accounts in July 2021.

“A lot of investors have also been preferring the SIP route given the increased awareness around investing. Moreover, this has been a great way to invest small amounts consistently. It’s also a great way of investing for first-time investors,” Krishnan added.

Asset under management via the SIP route also saw a growth of 4.62% to Rs 5.26 lakh crore and stayed above the Rs 5 lakh crore mark for the second month in a row.

Debt funds

On the debt front, investors poured in mere Rs 1,074.44 crore into open-ended debt schemes mutual funds last month after investing Rs 73,694.04 in July 2021.

“Overnight funds witnessed outflows to the tune of INR 11807.67 crores, followed by low duration funds. Liquid funds too witnessed some outflows. There has also been a significantly higher level of redemptions across these categories as well as a decrease in the number of folios across categories, except for floater funds. Corporates and businesses choosing to pull out their short-term money parked in Overnight Fund and Liquid Fund for their business activities has led to the outflows across categories like overnight and liquid funds,” explained Krishnan of Morning Star.

Gold ETFs & AUM

Gold exchange-traded funds witnessed a marginal inflow of Rs 23.92 crore after witnessing a net outflow of Rs 61.49 in July.

The asset under management of the mutual fund industry rose by 3.61% to scale to a new peak of Rs 36.59 lakh crore in August 2021 compared to Rs 35.31 lakh crore in July 2021.

“Indian MF Industry Net AUMs to breach record Rs 36 lakh crore milestone in August 2021. Retail AUM at Rs 17.15 lakh crores, almost half of Total Industry AUMs, SIP AUMs at record high Rs 5.26 lakh crores, which now forms a third of Retail AUM, healthy rise in SIP Accounts at record 4.32 crores and monthly SIP contribution at an all-time high at Rs 9,923.15 crores is reflective of established and rising retail preference towards mutual funds as a long-term wealth creation avenue,” Venkatesh added.