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Business News/ Markets / Stock Markets/  Equity MF inflows decline for 2nd consecutive month

Equity MF inflows decline for 2nd consecutive month

The small-cap equity funds saw a 50% rise in net flows to ₹3,282 crore as investors continued to repose faith


NEW DELHI : Equity mutual funds, comprising open-ended and closed-ended schemes, reported a decline in net inflows for the second consecutive month in May as investors booked profits with stock markets at record-high levels.

Net inflows fell 45% in May to 2,906.39 crore, from 5,275.48 crore in April, showed data from Association of Mutual Funds in India (Amfi).

April witnessed a much higher 74% drop in net inflows, from 20,190.35 crore in March, and to the lowest level since November 2022. Notably, overall inflows in growth-oriented equity schemes at 3,240.3 crore halved compared April’s 6,480 crore.

“Profit booking in rising market along with probable expenses towards vacations, and education could have led to lower investments in MF in May," said Manish Mehta, national head and sales, marketing and digital business, Kotak Mahindra Asset Management Company.

Net inflows into equity MFs fell 45% in May from April, showed data from AFMI
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Net inflows into equity MFs fell 45% in May from April, showed data from AFMI

D.P. Singh, chief marketing officer, SBI Mutual Fund, also attributed the decline in MF inflows to profit booking by people as markets are at higher levels. He, however, added that there is an uncertainty in the minds of distributors on the visibility of future revenues, thereby reducing the volumes.

Large cap funds saw outflows worth 1,362.28 crore in May. ELSS (equity-linked savings scheme), sectoral funds and focused funds also saw outflows. However, small-cap and mid-cap funds are seeing robust inflows. Small-cap funds from the equity segment saw a 50% rise in net flows to 3,282 crore as investors continued to repose faith.

The valuation difference in comparison to large-cap stocks continues to play out well for investors opting for mid and small-cap funds since the beginning of the calendar year, said Gopal Kavalireddi, vice-president of research at FYERS, an online discount brokerage.

SIP contribution, nevertheless, stood at an all-time high of 14,748.68 crore, which was higher than 13,728 crore in April. Data showed that SIP accounts stood at 65.28 million in May, rising from 64.23 million in April. Total SIP assets under management (AUM) stood at 7.53 trillion for May, compared to 7.17 trillion in April.

“This month, we observed the highest assets under management (AUM) through systematic investment plans (SIP), with the highest ever SIP contribution and a surge in new SIP registrations. These figures indicate that retail investors have maintained their confidence in SIP as their preferred investment instrument for wealth creation," said N.S. Venkatesh, CEO, Amfi. Venkatesh expects gross monthly inflows through SIPs to touch 17,000-18,000 crore by the end of FY24. “We have seen consistent growth momentum in the MF industry. Overall, MFs have shown an uptick even in the midst of volatile markets," he said.

The mutual fund industry’s net AUM stood at 43.2 trillion as of 31 May and investors are choosing to invest in categories where they find value, added Venkatesh.

Debt mutual funds -- both open-ended and closed-end schemes – however, continued to see net inflows for the second month in a row. Inflows in debt funds stood at 44,382.87 crore. April too, had seen inflows worth 1.05 trillion, after regular outflows observed during the prior December to March period. The inflows in debt funds, however, is being led by better inflows in corporate bonds and short-duration funds, said experts.

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Ujjval Jauhari
Ujjval Jauhari is a deputy editor at Mint, with over a decade of experience in newspapers and digital news platforms. He is skilled in storytelling, reporting, analysing and writing about stocks, investment ideas, markets, corporates and more. He is based in New Delhi.
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Updated: 09 Jun 2023, 11:28 PM IST
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