Equity mutual funds See highest flows in 4 months

Equity mutual funds received flows worth Rs 12,546 crore in January – the highest in four months – as investors continued to pump money into these products through the monthly systematic investment plans (SIP). Debt schemes witnessed outflows in the first month of 2023 on account of a shift in investments to bank fixed deposits. Equity schemes saw flows for the 23rd straight month in January.

Data from Association of Mutual Funds of India (AMFI) show the higher flows in January compared to Rs 7,303 crore in December were aided by flows into mid- and small-cap schemes.

Mid- and small-cap funds received Rs 1,628 crore and Rs 2,256 crore, respectively, while the large- and mid-cap category received Rs 1,902 crore. Equity Linked Savings Scheme (ELSS) – the industry’s tax saving product – saw fresh flows of Rs 1,414 crore ahead of the tax filing deadline.

Flows through systematic investment plans (SIPs) rose to Rs 13,856 crore – the highest ever through this route – as against Rs 13,573 crore in December.

“Expectations of a strong post-budget rally led to buying from investors,” said G Pradeepkumar, CEO, Union Mutual Fund. Average assets under management (AUM) of the industry rose to Rs 40.80 lakh crore, marginally higher than Rs 40.76 lakh crore in the previous month.

Fixed income schemes saw outflows of Rs 10,316 crore led by liquid and overnight funds that saw redemptions of Rs 5,042 crore and Rs 3,688 crore, respectively. Short-duration debt funds saw outflows of Rs 3,859 crore.

“Some money moved out from open-end debt fund categories as banks increased deposit rates and long-term investors locked into target maturity funds where yields are attractive,” said A Balasubramanian, CEO, Aditya Birla Sunlife Mutual Fund.The index fund category, which includes both passive equity and debt funds, saw inflows of ₹5,813 crore with investors locking into high-yield passive target maturity funds.

Multi-asset funds which invest in a mix of equity, debt and gold saw inflows of Rs 2,182 crore, as investors believe gold and debt will protect portfolios from volatile equities. Dynamic asset allocation funds, which invest in equity and debt based on market valuations, saw outflows of Rs 218 crore.

With spreads improving, arbitrage funds saw inflows of Rs 2,054 crore, as investors preferred them over liquid funds for better tax efficiency.

Gold Exchange Traded Funds (ETFs) saw outflows of Rs 199 crore on profit booking after the sharp rise in the yellow metal’s prices by 17.7% in the past year.