The coronavirus-led market crash has shaken investor confidence with overall net inflows in equity mutual funds witnessing a steep fall of 47 per cent from Rs 11,723 crore in March to Rs 6,213 crore in April. The inflows in March were the highest in the financial year 2019-20. The fall has come even as the benchmark Sensex rallied 14 per cent for the month.
Contrary to expectations, however, debt mutual funds witnessed a net inflow of Rs 43,432 crore in April compared to a net outflow of Rs 194,915 crore in the previous month. Fears ran amok that Franklin Templeton closing its six debt mutual fund schemes may trigger outflows from debt mutual funds. However, net outflows were only seen in credit risk and medium duration categories.
"In the prevailing scenario of low inflation, expected softer interest rate regime, MF industry would see heightened interest in fixed income schemes, especially low duration schemes," says N S Venkatesh, CEO, Association of Mutual Funds in India (AMFI).
SIP contribution sees marginal drop
Data from AMFI showed SIP contribution slipped 3 per cent to Rs 8,376.11 crore in April from the record Rs 8,641.20 crore registered in March 2020. However, it was higher than Rs 8,238 crore recorded in April 2019.
Total number of SIP folios, nevertheless, jumped 1.93 lakh to 3.13 crore from 3.11 as on March 2020. The assets under management (AUM) from SIPs also rose to Rs 2.75 lakh crore from Rs 2.39 lakh crore in March.
"Despite subdued economic scenario, retail Investors are seen to be continuing with their goal-based investment discipline, displaying mature investment conduct, as seen from month-on-month rise in retail AUMs, as also marked rise in the number of SIP accounts. Slowing redemptions in retail and overall mutual fund schemes is indicative of rising investor preference for mutual funds as a long-term wealth creation," says Venkatesh.
Category flows - equities
Category wise, largecap and multicap funds attracted highest inflows of Rs 1,691 crore and Rs 1,240 crore, respectively compared to Rs 2,061 crore and Rs 2,268 crore inflows recorded in the previous month.
"While large caps are considered to be more stable than its mid and small cap counterparts during turbulent times, multi-cap category provides investors exposure in all the three segments of the equity markets (i.e., large, mid and small caps). The aim is to benefit from the opportunities arising in all three market segments by staying invested in one fund. Due to this aspect, this category of funds is also used from asset allocation perspective and has thus been gaining significant traction," says Himanshu Srivastava, Senior Analyst Manager Research, Morningstar Investment Adviser India.
Category flows - debt
Highest inflows (Rs 68,848 crore) went into liquid funds in April, while credit risk category witnessed a net outflow of Rs 19,239 crore during the month. "This is among the highest ever monthly net outflow from this category," says Srivastava.
Medium duration category, which also has funds that invests in lower credit space, witnessed net outflow of Rs 6,364 crore.
"Given the liquidity squeeze in the lower credit space of the Indian bond markets and ensuing risk averse environment, there was a flight to safety from investors. Consequently, investors rushed to redeem their investments from avenues which they perceived as taking higher risk," says Srivastava.
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