Inflows in equity mutual funds (MFs) jumped 25 percent MoM in February to over ₹15,000 crore, seen for the first time in 9 months, on the back of successful NFOs (new fund offers) and rising inflows in sectoral funds as well as smallcap funds.
Equity mutual funds witnessed a total inflow of ₹15,685 crore in February 2023 as against an inflow of ₹12,546 crore in January 2023.
It is noteworthy that the equity contribution to mutual funds has been on an increase for the past three months. Also, inflows in equity MFs have been witnessed for a twenty-fourth consecutive month, as DIIs bet on India’s growth story.
Investors are changing their approach to cherry-picking value-bargains across varied pockets.
A total of 27 new fund offers (NFOs) for mutual fund schemes were launched during the month of February. Out of these, there were 21 open-ended schemes and six close-ended ones.
Among open-ended schemes, the maximum number of schemes i.e. 11, were launched in the index fund category.
Meanwhile, small-cap fund inflows remained healthy at ₹2,246 crores, up 57 percent YoY. This category saw an inflow in excess of ₹1,500 crore since March 2022. Multicap fund saw inflows of ₹1,977 crore in Feb vs ₹1,773 crore in Jan.
Sectoral funds saw the highest inflows in Feb at ₹3,856 crore versus ₹903 crore in January, up a massive 327 percent.
Index MFs also saw strong inflows. The 12-month cumulative rolling inflows in index-based mutual funds jumped to ₹80,755 crore — the highest ever for passive as well as active funds. Just in Feb, inflows in index funds stood at ₹6,244 crore versus ₹5,813 crore in Jan.
Meanwhile, debt oriented schemes saw outflows for the third month in a row to the tune of ₹13,815 crores, up 33 percent QoQ and 67 percent YoY. Of the category, overnight funds saw an inflow of ₹2,945 crores after witnessing outflows in the previous four months.
However, hybrid schemes saw muted inflows of ₹460 crores after ₹4,492 crores during January 2023.
Equity (active) funds flow jumped 6x over the past four months, due to India’s deemed strength vis-à-vis global peers, whereas debt funds continue to run of uncertain flows, reflecting caution in midst of central banks' pacing rate hikes.
ETFs turned positive with inflows worth ₹29 crore as against an outflow of ₹1,709 crore in Jan.
Besides, the number of mutual fund folios reached an all-time high of 144,250,756 in February 2023, while the number of systematic investment plans (SIPs) jumped to 62,826,035, higher than 62,162,694 in the previous month, according to data released by AMFI.
Post the Feb MF data, Jeevan Kumar KC, Head Investment Advisory at Geojit Financial Services, noted that the latest AMFI data divulge the fact that the investors are getting more mature and they are prepared enough on how to use the opportunity wisely.
"The consistent rise in SIP inflow is a positive sign as the retail investors realize the volatility in the market essentially averages out their purchasing cost over a long investment tenure and they also don’t need to worry about how to time the market when they opt for the SIP route," he said.
Akhil Chaturvedi, Chief Business Officer, Motilal Oswal AMC, also stated that despite market volatility, equity funds continue to garner strong inflows, while hybrid funds saw subdued net inflows in February.
"Within equity funds, the Sectoral and thematic segments garnered maximum flows. Small-cap funds continue to garner flows, followed by Multicap, Midcap and Large and Mid-caps. Within the hybrid space, Multi-Asset Funds continue to build on the momentum of the last two months as debt yield provided attractive investment opportunities along with the long-term appeal of equity and gold. Overall, investors continue to maintain faith in India’s growth potential and tap the current opportunity in markets to add to positions. On the debt side, medium-term funds, long-duration funds and gilt funds saw inflows, a welcome break from consistent outflows,” he highlighted.
Further, Viraj Gandhi, CEO, SAMCO MF, believes that range-bound markets, high interest rates, and weaker investor sentiments are the current mood of the markets but still healthy flows towards equity-linked schemes suggest a strong inclination towards equities rather than debt-oriented schemes in the last 3 months.