Inflows in equity MFs touch 1-year high of Rs 11,485 cr in Mar

Inflows into equity mutual funds surged to Rs 11,485 crore in March, the highest level in a year, even as the broader market witnessed extreme volatility amid concerns over the impact of the coronavirus pandemic. Overall, the mutual fund industry witnessed a net outflow of Rs 2.13 lakh crore across all segments, mainly owing to withdrawal from liquid or money market category, data from the Association of Mutual Funds in India (AMFI) showed on Thursday.

In comparison, an outflow of just Rs 1,985 crore was seen in February. According to the data, inflows into equity and equity-linked open-ended schemes was at Rs 11,723 crore, while an outflow of Rs 238 crore was seen from close-ended funds, taking the net inflow to Rs 11,485 crore.

This was much higher than a net infusion of Rs 10,760 crore as seen in February. This is the highest level since March 2019, when equity schemes attracted an inflow to the tune of Rs 11,756 crore.

Fears of deepening global economic slowdown, due to the spread of the coronavirus pandemic, has been fast gaining momentum, which has spooked the markets globally, including India. Indian benchmark S&P BSE Sensex tumbled 23 per cent in March.

Himanshu Srivastava, senior analyst- manager research at Morningstar India, said that extreme volatility in the stock markets on the back of the pandemic did not deter investors from investing into equity funds. AMFI Chief N S Venkatesh said domestic investors continue to see the recent crises and decline in the equity markets as an opportunity to invest into equities.

"I believe sentiment is strong in equity schemes, which is witnessing robust flow," he added. Going ahead, he expects similar flow in April also.

Almost all the equity-oriented mutual fund categories registered net inflows last month. Multi-cap, large-cap, ELSS (equity-linked saving schemes) and mid-cap saw inflows of Rs 2,268 crore, Rs 2,060 crore, Rs 1,551 crore and Rs 1,233 crore, respectively, during the month under review.

"Investors continue to focus on the multi-cap category as it provides them 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, thus, has been gaining traction," Srivastava added. The staggering investment in equity schemes could be attributed to steady flow of Rs 8,641 crore through the Systematic Investment Plan (SIP) route.

The SIP's monthly contributions have breached the Rs 8,000-crore mark for the 16th consecutive month. On the other hand, gold ETFs saw an outflow of Rs 195 crore last month, after seeing the highest inflows of Rs 1,483 crore in February.

Interestingly, investments into gold ETFs dropped in March after rising for the fourth straight month. Overall, the industry, which witnessed a net outflow of Rs 2.13 lakh crore across all segments, saw a massive pullout of Rs 1.1 lakh crore from liquids funds.

"Outflow from debt was a quarterly phenomenon as banks and corporates take out money to pay advance taxes. In April, this will change into inflow," Venkatesh said. The outflow has pulled down the assets under management of the 44-players mutual fund industry to Rs 22.26 lakh crore in March-end from Rs 27.23 lakh crore in February-end.