Equity-oriented schemes saw net inflows for the third consecutive month in May amid a sharp up move in the stock prices. Inflows stood at Rs 10,083 crore in May—highest since March 2020, data released by industry body Association of Mutual Funds in India (AMFI) showed.
Market experts said run up in the markets coupled with waning in covid-19 infections has helped keep the mood buoyant. They, however, said the valuations have turned expensive and investors should also focus on asset allocation.
“The unfortunate part is inflows always follow near-term returns. Higher the past one-year returns, stronger will be the inflows and this is what is prevalent again,” said Swarup Mohanty, chief executive officer, Mirae Asset Management Company (AMC).
Strong performance of the equity markets has propelled the returns of equity funds in the last one year. While average returns of large cap funds have been 54 per cent in the last one year, mid cap and small cap have given returns of 78 per cent and 104 per cent respectively.
In March 2020, equity funds had seen net inflows of Rs 11,723 crore as savvy investors tried to take advantage of the sharp plunge in the market. Since then, however, flows have remained weak till recently. Between July 2020 and February 2021, equity funds reported outflows of around Rs 46,800 crore even as the markets continued to climb.
The trend has reversed in the last three months, with equity funds seeing inflows of Rs 22,600 crore since March.
Almost all the categories of equity funds saw net inflows barring equity linked saving schemes (ELSS) which saw net outflows of Rs 290.
Categories such as small cap, mid cap, focused and sectoral funds saw net inflows of over Rs 1,000 crore in each of them.
Multicap funds saw highest inflows of Rs 1,954 crore in the equity category.
The net assets under management (AUM) of the industry crossed the Rs 33 trillion mark led by a jump in equity assets. Equity AUM rose 7.7 per cent to Rs 10.7 trillion. In May, the Sensex had risen 6.5 per cent, while the BSE Midcap and Smallcap indices gained 7.1 per cent and 8.9 per cent, respectively.
The investments through systematic investment plans (SIPs) also increased in May compared to April. The SIP contribution in May stood at Rs 8,819 crore against Rs 8,590 crore in April. The SIP AUM rose to Rs 4.67 trillion.
“Investors who have accumulated higher savings in the last year due to lower spending and were staying on the sidelines are slowly getting back,”said Arun Kumar, Head of Research, FundsIndia.
Debt-oriented schemes saw net outflows of around Rs 44,512 crore, led by sharp outflows from the liquid funds and overnight funds. Market participants say that outflows were largely due to the poor returns generated from such funds. In the last one-year liquid funds and overnight funds gave generated returns in the three per cent range.
In May, liquid funds and overnight funds saw net outflows of Rs 45,447 crore and Rs 11,573 crore respectively.
Himanshu Srivastava, Associate Director – Manager Research, Morningstar India suggested that the outflows could be due to corporates and businesses choosing to pull out their short-term money parked in these funds for their business activities.
Corporate bond funds, short duration funds and banking and PSU debt funds also saw net outflows.
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