Gold ETFs shine in January, record net inflows of Rs 624 cr

Having witnessed a net outflow of Rs 141 crore in November 2020, the Gold ETF category is once again back on investors’ radar. While it received a net inflow of Rs 431 crore in December, the net inflow in January 2021 was even higher at Rs 624.87 crore.

Gold prices have come off their all-time highs touched in August last year. The month of January also saw a fair bit of correction in the prices of gold. This, along with expectation that gold may do well going ahead provided a good buying opportunity to investors, resulted in net inflows for the category in January.

“Gold functions as a strategic asset in an investor’s portfolio, given its ability to act as an effective diversifier, and alleviate losses during tough market conditions and economic downturns. This is where it draws its safe-haven appeal, as has been evident since 2019. From January 2019 till January 2021, the category has received a robust net inflow of Rs 48,159.4 crore,” said Himanshu Srivastava, Associate Director – Manager Research, Morningstar India, commenting on gold ETFs based on AMFI’s monthly data for January ’21.

Meanwhile, equity-oriented mutual funds continued to witness net outflows for the seventh month in a row. Though on an overall basis, the net outflow was lower than the previous month, yet in terms of absolute quantum, it continues to be on the higher side. During the month of January 2021, the segment witnessed a net outflow of Rs 9,253.22 crore, which is lower than the net outflow of Rs 10,147.12 crore witnessed in the month of December.

“The continuation of net outflows from equity funds could be attributed to profit booking/portfolio rebalancing as markets continue to touch new highs. In fact, the net outflow number would have been higher had it not been for the NFO in the Sectoral or thematic fund category which collected Rs 4,185 crore. That said, while the gross purchase (new investments) was lower in January than the previous month; gross redemptions also came down at Rs 33,383.65 crore from Rs 36,220.28 crore in December,” said Srivastava.

This suggests that while investors are yet to come back and invest substantially in the funds, there are signs of moderation with respect to redemption as well. Since July, equity-oriented MFs have witnessed a net outflow of Rs 42,257.02 crore, but the net outflow figure in the last two months has displayed decreasing trend.

Outflows were witnessed in most of the equity fund categories except for Multi Cap Fund category, Sector or Thematic Fund category (largely due to a launch of an NFO which garnered good investments) and Dividend Yield category (which witnessed a very marginal net inflows).

Flexi Cap Fund category was the worst hit during the month. During January 2021, 16 Multi Cap Funds were re-categorised as Flexi Cap Funds. Therefore, “continuing with the trend that we have been witnessing since June 2020, there have been increasing net outflows from the funds in this category (which were earlier a part of Multi Cap category). In January, the category witnessed a net outflow of Rs 5933.67 crore,” informed Srivastava.

Large Cap category was also hit hard in the month of January with a net outflow of Rs 2,853.43 crore. However, the net outflow this month was lower than the net outflow of Rs 3876.39 crore recorded in December. Multi Cap Fund category, on the other hand, received the highest net inflow during the month.