Investors poured nearly Rs 12,000 crore into equity oriented mutual funds in the three months ended December 2019, a sharp slump of 50% from the preceding quarter, on worries over stock valuations as well as stuttering economic growth.
Notably, all categories of equity funds, including large-cap, mid-cap, small-cap and dividend yield funds, saw a drop in flows compared to the preceding quarter.
According to a Morningstar report, total flows in equity mutual funds stood at Rs 11,837 crore for the quarter ended December as against Rs 23,874 crore in the September quarter.
During April-June quarter, inflows in such schemes stood at Rs 17,500 crore.
The asset base of equity funds, on the other hand, rose by 6% to Rs 7.7 trillion for the quarter ended December.
"Although the flows were positive, the sharp fall in equity flows could be attributed to concerns around over-valuations of some of the underlying stocks held by funds, polarised performances of some of the heavy-weighted stocks in the indexes, which camouflages the performance of the other under-performing stocks, and concerns regarding the steady fall in the GDP growth of the country that have been witnessed in the past few months," the report noted.
Over 30% of the net equity flows have been directed toward the large-cap category, as this segment has been the most resilient over the past year and delivered good returns.
However, inflows in large-cap funds plunged by 42% to Rs 3,500 crore for the period under review, from Rs 6,000 crore seen in July-September.
Until this quarter, large-cap equities had continued to see steady rise in flows as investors continued to align their investments to these funds relative to mid-cap and small-cap counterparts, which saw significant corrections in some of the underlying stocks.
Mid-cap funds saw infusion to the tune of Rs 2,688 crore in the period under review, from Rs 3,738 crore in the preceding three months, translating into a decline of 28%.
The flows in the small-cap category halved to Rs 1,360 crore, from Rs 3,038 crore in the September quarter.
Overall, mutual fund flows have been growing consecutively for the past four quarters. Such funds witnessed a net infusion of Rs 1,28,463 crore in the third quarter of the ongoing financial year 2019-20, compared to Rs 46,578 crore in the preceding three months.