Equity funds see surge in net inflows in May 2021

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Investors flocked to equity funds in a big way in the month of May. Buoyant stock markets attracted investors to equity funds which translated into net inflows (investments exceeding redemptions) of Rs 10,082 crore, according to monthly data released by Association of Mutual Funds in India (AMFI).

Net inflows in equity funds stood at Rs 3,437 crore in April 2021.

Anup Bhaiya, Founder of Mumbai-based Money Honey Financial says, “When the equity markets are at all-time high, past returns of equity funds look good which makes investors comfortable with investing in equity funds.”

Despite net outflows of Rs 44,512 crore in May compared to net inflows of Rs 100,903 crore in previous month in bond funds, the assets under management for the mutual fund industry as on May 31, 2021 went up to Rs 33.05 trillion compared to Rs 32.37 trillion as on April 30, 2021. Part of this can be attributed to the rising stock prices.

Barring equity-linked saving schemes (ELSS) popularly known as tax-saving funds which saw net outflows of Rs 289 crore, all equity fund categories saw net inflows. Multicap schemes saw highest net inflows of Rs 1,954 crore for the month. Mid-cap funds also got net investments of Rs 1,368 crore.

Systematic investment plans – the preferred means for many individual investors to invest in equity funds also saw increased response. Contribution through SIP stood at Rs 8,818 crore for May compared to Rs 8,596 crore in April. Number of SIP accounts outstanding also went up to 3.79 crore in May compared to 3.72 crore in previous month.

Investors also showed preference for fund of fund schemes investing overseas. Rs 2,423 crore worth of net investments were done by investors in these funds. Some of these inflows can be attributed to two new fund offers closed for subscription in May. In April fund of funds investing, overseas got net inflows of Rs 695 crore.

Among hybrid funds – schemes investing in stocks, bonds and gold in varying proportion as per their mandate also saw net inflows of Rs 6,217 crore in May 2021 compared to Rs 8,641 crore in previous month. Arbitrage funds got net inflows of Rs 4,520 crore. Balanced advantage funds got net inflows of Rs 1,362 crore.

“High valuations in many segments of equity markets and rising prices of stocks of many fundamentally unsound companies should make investors act carefully while investing in equities. Investments in balanced advantage funds can help investors if markets turn volatile in near future.”

Though gold continued to attract investors, the net inflows; however, were lower in May. Gold ETF tracking gold prices attracted net investments of Rs 287 crore compared to Rs 680 crore in April.

Among bond funds, liquid funds and overnight funds saw net outflows of Rs 45,447 crore and Rs 11,573 crore, respectively. Corporate bond funds and banking & PSU bond funds also saw net outflows of Rs 1,468 crore and Rs 1,339 crore, respectively in May.