Fear of missing out, lack of alternate investment options and a trend of buying on every correction led to investors allocating ₹25,077 crore to equity mutual funds in December, the highest monthly net inflow into such funds yet. In November, the net inflow into equity MFs stood at ₹11,614 crore. Collections through systematic investment plans rose to ₹11,306 crore last month from ₹11,005 crore in November.
However, redemptions of ₹49,154 crore from debt funds saw the industry’s assets under management (AUM) dip marginally to ₹37.92 lakh crore in December from ₹38.45 lakh crore in the previous month.
“Investors realise that their equity mutual fund lumpsum and SIP transactions made over the long term have yielded good results,” said A Balasubramanian, CEO of Aditya Birla SL Mutual Fund. “This has boosted their confidence and many new investors who are under-allocated to equity are adding money now.”
All categories of equity funds got inflows, with the bulk of the money coming into multi-cap funds of ₹10,516 crore due to new fund offers (NFOs) of Axis Multicap, HDFC Multicap and IDFC Multicap fund.
Investors also allocated ₹2,408 crore to flexi-cap and ₹1,578 crore to large-cap categories.
Amid high valuations, fund houses have been recommending these categories as the impact of a correction would be lower on large companies.
Sectoral and thematic funds saw inflows of ₹3,770 crore while index funds saw inflows of ₹4,504 crore as many investors believe they are a good substitute to large-cap equity funds, given their low cost.
“Despite the concerns over the Omicron variant of the coronavirus pandemic and the surge in the number of Covid cases in the country, which has triggered a third wave of the pandemic, the growth outlook over the long-term remains strong,” said Himanshu Srivastava, associate director at Morningstar India.
Many investors look to make the most of market dips as they believe corrections would be short lived, experts said. “There are still a lot of investors who have been waiting on the sidelines. Any dip is used as a buying opportunity by them,” said G Pradeepkumar, CEO of Union Mutual Fund.
Within hybrid funds, investors continued to allocate to balanced advantage fund categories that are conservatively managed and allocate lower amounts to equity when valuations are steep. Amongst hybrid categories, balanced advantage funds saw highest inflows of 3,793 crore. Equity savings funds and conservative hybrid funds that allocate 10-40% to equities saw inflows of 285 crore and 305 crore, respectively.
Debt funds saw outflows due to quarter-end requirements and investors being disappointed with poor returns and believing interest rates are likely to move up in the coming year. Rate hikes could lead to mark to market losses in long-duration funds.