Equity mutual funds outflow continues for eight straight month but quantum halves

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Equity mutual funds witnessed outflows for the eight-straight month in February as investors booked profits with markets hitting record highs on the back of a growth-oriented budget.

According to data released by the Association of Mutual Funds in India on Tuesday, open-ended equity-oriented schemes saw outflows of Rs 4,534.36 crore in February.

“There is general worry on valuations and the current rally possibly unreal and therefore investors seem to be trying to time in some way,” said Akhil Chaturvedi, Head of Sales & Distribution of Motilal Oswal Asset Management Company.

So now the moot question is where are these funds getting parked? Well, re-allocation into alternate investment avenues like real estate, direct equity or IPO’s, added Chaturvedi.

But in what seems like the light at the end of the tunnel for the mutual fund industry the net outflow for open-ended equity-oriented schemes in February has halved to Rs 4,534.36 crore in February from January outflows of Rs 9,253.22 crore.

“This is due to a combination of an 8% rise in gross inflows and a 13% drop in redemption month on month basis. This is probably driven by increased confidence in the recovery of the domestic economy and hence can continue as long as the news flowing on the data remains positive,” said Sunil Subramaniam, MD of ‎Sundaram Asset Management Company

N S Venkatesh, CEO of AMFI also concurs with Subramaniam. “We are slowly seeing positiveness coming back into the mutual fund schemes. The large & mid-cap funds saw Rs 150 crore of net inflow. I think March or April onwards we should see positive inflows coming for all the schemes on the equity side,” he said.

On the systematic investment plans (SIP) front, the numbers were a bit lower. Contributions from SIPs fell marginally to Rs 7,528.14 crore from Rs 8,023.39 crore in January.

Commenting on the fall N S Venkatesh, CEO of AMFI clarified that, “the monthly SIP contribution for Feb 2021 has come down by Rs 495 crore owing to weekend dawning on the end of February and the shortfall would get accumulated and reflected in March 2021 monthly data.”

However, on the positive side, SIP AUMs as also retail equity folios, are at an all-time high at Rs 4.21 lakh crores and 8.07 crore respectively, reflecting a continued disciplined approach adopted by the retail mutual fund investors, added Venkatesh.

Even the number of SIP accounts saw net additions of 7 lakh new accounts taking the tally of accounts to 3.62 crore accounts in February from 3.55 crore accounts in January.

“The number of folios, as well as gross purchase (new investments), was higher in February compared to January. This indicates that investors have now started to invest in the equity markets,” said Himanshu Srivastava, Associate Director – Manager Research, Morningstar India.

On the debt front also open-ended debt fund schemes saw an overall net inflow of Rs 1,734.63 crore. Within the debt fund schemes, liquid funds logged a maximum inflow of Rs 17,306 crore. Besides, low money market funds also saw inflow to the tune of Rs 9,580 crore. However, short-duration funds witnessed an outflow of Rs 10,286 crore, followed by corporate bonds of Rs 6,752 crore. Outflows in debt schemes were primarily due to rising bond yields.

Even Gold ETFs continue to see net investments in February, though at a slower pace. Investors invested Rs 491 crore compared to Rs 624 crore in January.

All in all, the industry’s assets under management inched up by 1% from Rs 31.84 lakh crore in January 2021 to Rs 32.29 lakh crore in February 2021.