(Inflow in equity mutual funds drop to Rs 3,437 crore in April

Synopsis

Equity mutual funds witnessed a net inflow of Rs 3,437 crore in April, making it the second consecutive monthly infusion.

By PTI

May 11, 2021, 01:43 PM IST

Equity mutual funds witnessed a net inflow of Rs 3,437 crore in April, making it the second consecutive monthly infusion.

However, this was much lower than an inflow of Rs 9,115 crore seen in March, data from the Association of Mutual Funds in India showed on Tuesday.

Prior to this, equity schemes had consistently witnessed outflow for eight straight months from July 2020 to February 2021.

Apart from equities, investors infused over Rs 1 lakh crore in debt mutual funds last month after withdrawing Rs 52,528 crore in March.

Overall, the mutual fund industry witnessed an inflow of Rs 92,906 crore across all segments during the period under review, compared to an outflow of Rs 29,745 crore in March.

As per the data, inflow from equity and equity-linked open ended schemes was at Rs 3,437.37 crore in April.

Barring multi cap, dividend yield, value fund and thematic fund categories, all the equity schemes have seen inflow last month.

Overall, equity schemes had witnessed an outflow of Rs 9,253 crore in January, Rs 10,147 crore in December, Rs 12,917 crore in November, Rs 2,725 crore in October, Rs 734 crore in September, Rs 4,000 crore in August and Rs 2,480 crore in July, which was their first withdrawal in over four years.

Prior to this, such schemes had attracted Rs 240.55 crore in June.

Further, gold exchange traded funds (ETFs) witnessed net inflow of Rs 680 crore last month, compared to Rs 662 crore in March.

The asset under management (AUM) of the mutual fund industry rose to Rs 32.38 lakh crore in April-end from Rs 31.43 lakh crore in March-end.

The outflow comes following an inflow of Rs 1.69 lakh crore in December quarter, Rs 35,522 crore in September quarter and Rs 1.09 lakh crore in June quarter.

According to the report, fixed-income category had faced a challenging atmosphere since the downgrade to IL&FS back in 2018.

A spate of downgrades to other entities following the IL&FS crisis left some of the fixed-income funds in a serious liquidity crunch as redemptions in certain categories explode, it added.

"Given the uncertainty in the economy caused by COVID-19, investors are again moving toward risk-averse assets in the fixed-income segment during volatile times, as they tend to provide better protection to their capital relative to some credit strategies," the report noted.

The latest outflow pulled the asset base of the fixed-income category for March 2021 quarter to Rs 13.28 lakh crore, which was 6 per cent lower than the previous quarter when the total asset base was Rs 14.06 lakh crore.

The liquid, ultra-short-term, money market, and overnight fund categories constitute a substantial portion of the total assets (about 44 per cent) within the fixed-income category, the report said.

Given its significant contribution, even a slight change in the amount of flows in percentage terms in these segments can make a huge difference in the overall flows within the fixed-income category, it added.

Around 56 per cent of the total outflow during the quarter under review in the fixed-income segment came through liquid funds, where most of the institutional money is parked.

Liquid funds witnessed net withdrawal of Rs 47,398 crore during the quarter under review typically due to advance tax payment requirements. This comes following an inflow of Rs 16,270 crore.

In addition, low duration funds and short duration funds saw outflow to the tune of Rs 21,044 crore and Rs 12,419 crore respectively.

Further, banking & PSU category, which is considered as a safe option, witnessed outflow of Rs 6,427 crore as opposed to receiving net flows of Rs 11,500 crore in the previous quarter.

Under the Sebi rules, banking & PSU funds have to invest a minimum 80 per cent of their total assets in debt instruments of banks, public sector undertakings, or public financial institutions. This makes the category of investment relatively safer than some of the other fixed-income categories in terms of credit risk.

As per the Morningstar report, the general trend over the last few quarters (not taking yields into consideration) has been for investors to move toward categories where the quality of underlying papers is higher.

Categories such as corporate bonds, banking, public-sector undertakings debt, and gilt funds have seen a significant uptick in their flows, whereas categories like credit risk and medium duration, which tend to have significant allocations to sub-AAA rated instruments, have seen significant outflows, it added.

Apart from open-end debt funds, investors took out Rs 4,672 crore from open-end equity funds in the quarter ended March this year.

The "other schemes" category, which typically has sub-categories of exchange traded funds or ETFs (other and gold), index funds, and funds of funds overseas, has been gaining a lot of traction recently and the segment saw net inflows worth Rs 20,063 crore during the quarter under review.

The fourth quarter of 2020-21 saw the new fund offering (NFO) of a total of 27 open-end funds (including ETFs) and two closed-end funds. Cumulatively, these funds were able to garner Rs 11,826 crore at their inception stage.

Overall, open-end mutual funds witnessed net outflow of Rs 54,656 crore during the quarter under review.

STOCK PSYCHOLOGY

Tuesday, May 11, 2021