Equity mutual fund inflows rise 71% to ₹12,472 crore in January

Mumbai: Equity-oriented mutual fund (MF) schemes, both open and close-ended, attracted net inflows worth ₹12,472 crore in January, up 71% sequentially, as per data from Association of Mutual Funds in India (Amfi). Inflows into equity MFs have been positive since March 2021.

Monthly SIP (systematic investment plan) contributions also maintained their upward trajectory, rising 2.1% month-on-month to ₹13,856 crore in January. Compared to last January, SPI contributions rose 20.3%. The number of SIP accounts rose 23% year-on-year (YoY) to 6.22 crore last month. 

“Encouraging SIP numbers indicates retail investors’ trust in mutual funds. We believe that SIP inflow momentum has and will continue to balance the FII outflows in the market," said NS Venkatesh, chief executive, Amfi.

According to Kavitha Krishnan, senior analyst – Manager Research, Morningstar India, FII selling was largely the result of multiple factors like discomfort around valuation, the movement of FIIs into other emerging economies, and profit booking.

In equity, small cap funds, large & mid cap funds, and multi-cap funds saw net inflows of ₹2,256 crore, ₹1,902 crore and ₹1,773 crore respectively. Over the past several months, investors have been flocking to small cap funds following a correction in their valuations. 

"As investors make conscious investing decisions, their overall preference towards investing in dips is evident from the magnitude of flows into small and mid-cap stocks, considering that the Nifty Smallcap 100 was amongst the worst performers in December 2022. On an overall basis too, the markets ended in the red in January, with most sectors witnessing negative returns except for IT and auto sectors," said Krishnan.

Debt MF (open and close-ended) schemes, on the other hand saw net outflows of ₹9,733 crore in January, though, sharply lower than ₹20,732 crore worth of outflows recorded n December. This was led by net outflow of ₹5,042 crore from liquid funds, ₹3,859 crore from short duration funds and ₹3,688 crore from overnight funds. 

In sharp contrast to outflows in debt MFs, money market funds received net inflows of ₹6,460 crore and ultra-short duration funds of ₹1,765 crore in January. Net outflows from corporate bond funds, medium duration funds, and medium to long duration funds likely reflect the impact of investors exiting these debt fund categories as interest rates rise. 

“There are expectations of interest rate hikes. So, there could be mark-to-market fluctuations in debt funds, hence investors are taking out money,“ said Venkatesh.

Mutual fund houses garnered ₹4,422 crore by way of new fund offers launched during January. Of this, ₹1,204 crore was mopped up by the new HSBC Multi Cap Fund, another ₹1,199 crore by debt MF schemes, and ₹1,572 crore by Aditya Birla Sun Life Multi Asset Allocation Fund. The remaining ₹447 crore was raised largely via index funds and a few ETFs (exchange traded funds).