After seeing net outflows for eight straight months, equity mutual funds in March saw investors re-allocating funds to equity schemes. Open-ended equity schemes saw net inflows of Rs 9,115.12 crore, shows data from Association of Mutual Funds (Amfi).
Mutual funds have also seen sharp growth in assets under management for FY21 with the MF Industry AAUMs at historic high at Rs 32.17 lakh crore in March 2021, jumping 30% as compared to Rs 24.70 lakh crore in March 2020. NS Venkatesh, chief executive, AMFI, said, “Mutual Funds continue to be preferred investment vehicle to build long term goal-based wealth creation, as is reflected from the number of unique investors across mutual fund schemes increasing in the last one year, by 10% from 2.08 crore as on March 31, 2020 to 2.28 crore as on March 31, 2021.”
The most notable trend in March was the reversal of outflows and the return of retail investors to equity-oriented mutual fund schemes. Equity schemes had been witnessing outflows over the last few months, after investors decided to book profits as markets touched all-time highs. According to experts, investors have mostly booked their profits and are now allocating to equity schemes for long-term investment. Additionally, higher gross sales and lower redemptions also contributed to the inflows in equity mutual funds. The funds that saw the maximum inflows were sectoral or thematic funds, ELSS, and Midcap fund at Rs 2009.35 crore, Rs 1,552.25 crore, and Rs 1,502.53 crore, respectively. Akhil Chaturvedi, head of sales and distribution, Motilal Oswal AMC, said, “We have seen a reversal in trend of negative sales for past several months into positive sales for the month of March 2021.
Higher gross sales and lower redemptions for the month is clearly an outcome of faith in subsiding the fear of Covid-19-led slowdown in economy to V shaped recovery in many sectors across the economy.”
Experts believe that lower interest rates and lack of better investment options will certainly bring appetite for the equity asset class back and this perhaps could be the turning point for equity mutual funds. Moreover, the contribution of SIPs also jumped in March at Rs 9,123 crore which is higher than Rs 7,528.14 crore. S Krishnakumar, former CIO – equities, Sundaram Mutual fund, said, “SIP contributions have increased in March which points out that the middle class which was sort of holding back has started once again investing into MFs and there are new investors that have entered the market.”
However, the total inflows into the mutual fund industry remain negative, thanks to the redemptions witnessed in open-ended debt funds. They saw an outflow of Rs 52,528.07 crore after corporates decided to redeem in order to fulfill their tax mandates.
Among debt schemes, the funds that saw the maximum redemption were liquid fund, low duration fund, and short duration fund at Rs 19,383.68 crore, Rs 15,847.34 crore, and Rs 9,025.14 crore.