Mutual Funds AUM declines over 2% in May on the back of debt funds outflow & mark to market fall in equity funds

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Mutual fund industry’s AUM (asset under management) has declined by 2.1 per cent to Rs 37.2 lakh crore in May from Rs 38 lakh crore in April 2022 pulled down by outflows in debt funds and mark-to-market decline in equity funds, domestic brokerage firm ICICI Direct Research said in its report. 

The AUM of pure equity funds in May stood at Rs 13.3 lakh crore as compared to Rs 13.6 lakh crore in April. While May inflows surged Rs 18500 crore as against Rs 15900 crore in April. The higher inflows were mainly on the weak markets during the previous month, the brokerage said.  

Similarly, SIP continued to trend higher and came in at Rs 12286 crore versus Rs 11863 crore month-on-month. The AUM of Dynamic Asset Allocation/Balanced Advantage Fund stands at Rs 1.8 lakh crore and this category saw higher inflows at Rs 2250 crore in May. 

The trend of outflow in other debt funds continues as the outlook remain cautious in the rising interest rate environment, ICICI Direct said in its note. 

It added that the AUM of index funds which is largely dominated by retail investors stood at Rs 78000 crore in May 2022 and equity ETF AUM (Rs 4.1 lakh crore) is still dominated by institutional investors, has gained significant popularity among retail investors as well. 

Equity markets have seen a sharp correction in the last 6-7 months after hitting an all-time high in the month of October 2021. Large-cap funds have seen a fall of around 18 per cent while the category average of midcap and smallcap funds have fallen by around 20 per cent during a similar period. 

The sharp rotation in the sector has led to various sector funds or market cap funds moving from best performing to worst performing within a short period of time, the brokerage noted. 

It added that the recent fall in the market has made valuations more reasonable as valuations had turned expensive in many sectors, especially in many of the midcap and smallcap companies.