The financial year began on a relatively strong footing for the mutual fund industry despite volatility in the global financial markets. Debt, equity and hybrid schemes of mutual funds collectively saw net inflows in April. The overall assets under management for the mutual fund industry stood at Rs 38.03 trillion as on April 30, 2022, compared to Rs 37.56 trillion a month earlier.
However, equity schemes registered net inflows of Rs 15,890 crore in April compared to Rs 28,463 crore in March 2022. In this period, the Nifty 50, the bellwether index of the stock market, lost 2.07 percent, falling to 17,102 points from 17,464. However, small and midcap indices reported nominal gains. This was an indication that retail participation in the stock market has been good through the month. Thematic or sector funds saw the highest net inflows of Rs 3,843 crore in April. This was primarily on account of the new fund offer of ICICI Prudential Housing Opportunities Fund which collected Rs 3,130 crore. Large and midcap schemes and flexicap schemes saw inflows of Rs 2,049 crore and Rs 1,708 crore, respectively. Small-cap schemes had net inflows of Rs 1,716 crore.
“The lower quantum of net inflow from the previous month could be attributed to investors going slightly cautious with their investments given the ongoing challenges to the investment environment. This is evident from a comparatively lower quantum of funds mobilised in April compared with March,” said Himanshu Srivastava, associate director-manager, research, Morningstar India.
Many investors prefer to invest through systematic investment plans (SIPs), especially when investing in equity funds. SIP contributions for April 2022 came down marginally to Rs 11,863 crore against Rs 12,327 crore in March. The number of SIP accounts in the same period went up to 5.39 crore from 5.27 crore.
Akhil Chaturvedi, chief business officer, Motilal Oswal AMC, said, “Despite volatility in the markets and fear around macroeconomic factors both globally and locally, it is a good trend to see continuous positive flows in equities. Though lower than last month, which may be due to NFO allotment, SIP flows are holding strong which is also very positive.” He expects the positive trend in SIP flows to continue.
Hybrid funds—mutual fund schemes investing in a varying mix of stocks, bonds and gold—attracted many investors. Compared to net outflow of Rs 3,603 crore in March 2022, these schemes saw net inflows of 7,240 crore in April. Among these, arbitrage funds registered net inflows of Rs 4,092 crore in April compared to net outflow of Rs 6,796 crore in March. Net inflows in balanced advantage funds went down to Rs 1,543 crore from Rs 1,719 crore in March.
The selling pressure on debt funds continued in April. Expectations of an increase in interest rates and rising bond yields drove investors away from duration products of mutual funds. Short-duration debt funds and banking & PSU debt funds saw net outflows of Rs 4,452 crore and Rs 3,096 crore, respectively, in April. Investors came back to very short-term-oriented debt funds such as liquid, overnight funds. Overall debt funds saw net inflows of Rs 54,756 crore in April compared to net outflows of Rs 114,823 crore in March 2022.
Investors jumped to buy gold through exchange-traded funds investing in gold. Gold ETFs saw net inflows of Rs 1,100 crore compared to Rs 205 crore in the previous month. This is the highest net inflow amount in gold ETFs registered after the inflows of Rs 1,483 crore in February 2020.
After the hike in key policy rates by the Reserve Bank of India, investors may want to assess their portfolios again. This may lead to more churn in the debt fund allocation.