Equity MF inflows hit 4-month low of Rs 6,108 cr in April

New Delhi, May 8 (PTI) Inflows into equity mutual funds dropped to a four-month low of Rs 6,108 crore in April amid uncertainty triggered by the COVID-19 crisis.

Overall, the mutual fund industry witnessed a net inflow of Rs 45,999 crore across all segments last month as compared to an outflow of Rs 2.13 lakh crore in March, data by the Association of Mutual Funds in India (Amfi) showed on Friday.

'In the midst of uncertainty over the possible impact of the lockdown, due to COVID-19 pandemic, on the global as well as domestic economy, investors are looking at this scenario as an investment opportunity,' said Himanshu Srivastava, Senior Analyst Manager Research, Morningstar Investment Adviser India.

As per the data, inflows into equity and equity-linked open ended schemes stood at Rs 6,213 crore, while an outflow of Rs 105 crore was seen from close-ended funds, taking the net inflow to Rs 6,108 crore.

In March, such schemes attracted a net infusion of Rs 11,485 crore, which was the highest level in one year.

Prior to this, equity schemes saw an investment Rs 10,760 crore in February, Rs 7,547 crore in January and Rs 4,432 crore in December.

The month of April witnessed a relief rally in the markets on the back of measures taken by the government and RBI to boost the domestic economy. Besides, selective relaxation in lockdown to kickstart economic activity too helped in improving the sentiments.  Consequently, S&P BSE Sensex surged by around 14 per cent during the month.

Except for dividend yield fund category, all the equity-oriented mutual fund categories registered net inflows last month.

Large-cap, multi-cap and ELSS (equity linked saving schemes) saw inflows of Rs 1,691 crore, Rs 1,240 crore and Rs 752 crore respectively during the month under review.

'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,' Srivastava added.

Investment through the systematic investment plan (SIP) route declined to Rs 8,376 crore last month from Rs 8,641 crore in March. However, the number of SIP accounts rose by 1.94 lakh to 3.14 crore.

'It is heartening to note that 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,' Amfi Chief Executive N S Venkatesh said.

''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,'' he added.  After witnessing a net outflow of Rs 1.95 lakh crore in the previous month, the debt-oriented categories witnessed a net inflow of Rs 43,432 crore in April. This was largely driven by a net inflow of Rs 68,848 crore in liquid funds.

With regards to debt funds, Venkatesh said investors should not panic, and the shutting down of six debt schemes by Franklin Templeton was a one-off incident.

'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,' Srivastava said.

Credit risk category, given its nature, was the worst hit with a net outflow of Rs 19,239 crore during the month. This is among the highest ever monthly net outflows from this category.  Venkatesh added that redemptions have slowed down substantially in credit risk funds because of special window of Rs 50,000 crore provided by the RBI.  As far inflow in credit risk funds is concerned, people will take a little bit of time, he added.

Medium duration category, which also has funds that invest in lower credit space, too witnessed net outflow of Rs 6,364 crore.

Besides, gold ETFs saw an inflow of Rs 731 crore last month, after withdrawals of Rs 195 crore in March.

The assets under management of the 44-player mutual fund industry stood at Rs 23.93 lakh crore in April-end, from Rs 22.26 lakh crore in March-end. PTI SP ABM ABM