Equity MF inflows fall 14% in March despite market rebound; sectoral funds see steep drop

The Association of Mutual Funds in India (AMFI) announced that net equity mutual fund inflows declined by 14% to Rs 25,017 crore in March compared to Rs 29,242 crore in February. This reduction occurred despite a favourable market environment, with BSE Sensex and NSE Nifty 50 indices recovering by 5.77% and 6.30%, respectively. Additionally, systematic investment plan (SIP) inflows saw a marginal decrease of 0.28% to ₹25,926 crore in March. This decline in inflows could be attributed to the market's prior correction phase in February, when net equity mutual fund inflows had already fallen by 26% from the previous month.

Despite the decrease in inflows, the mutual fund industry's total assets under management (AUM) reached an all-time high of Rs 65.74 lakh crore in March, up from Rs 64.53 lakh crore the previous month. However, the equity fund category saw a notable decrease in net investments into Sectoral/Thematic Funds, which plummeted 97% to Rs 170.09 crore from Rs 5,711.58 crore in February. Large-cap funds also continued to experience outflows, losing Rs 2,479 crore in March, although this marked an improvement from February's outflows of Rs 2,866 crore.

On a more positive note, smallcap funds recorded a 10% increase in net investments, totalling Rs 4,092.12 crore, while midcap funds experienced a slight rise of 0.9% to Rs 3,438.87 crore. Nevertheless, the inflows into largecap funds decreased by 13.5%, landing at Rs 2,479.31 crore. Flexi-cap funds received the highest inflows at Rs 5,615 crore, up from Rs 5,104 crore in February.

In the fixed-income segment, debt mutual funds faced substantial net outflows amounting to Rs 2.03 lakh crore in March, significantly higher than February's Rs 6,525.56 crore. This trend in debt funds reflects broader market dynamics and investors' cautious sentiment towards fixed-income securities amid evolving economic conditions.

Dividend yield funds showed a promising trend with inflows almost doubling to Rs 140.5 crore in March from Rs 68.7 crore in February. Conversely, hybrid funds encountered an outflow of Rs 947 crore, a stark contrast to the previous month's inflow of Rs 6,804 crore.

New Fund Offers (NFOs) marginally increased, collecting Rs 4,085 crore in March, compared to rs 4,029 crore in February. These shifts in fund allocations underscore the changing priorities of investors who are seeking higher returns amid uncertain market conditions.