Inflows into equity MFs at record high

Equity mutual funds received a record inflow of ₹24,989.57 crore in December, more than double the ₹10,686.77 crore in the previous month, despite the growing threat of a third coronavirus wave derailing India’s economic recovery.

The contribution of monthly systematic investment plans (SIPs) to mutual funds also hit a record ₹11,305.34 crore in December, compared to the previous high of ₹11,004.94 crore in November, according to data released by the Association of Mutual Funds in India (Amfi) on Monday.

The previous high for inflows into mutual funds was ₹20,742.77 crore, received in July 2021.

“If one were to extrapolate this rate, the industry would end up witnessing 30% of its total equity assets under management (AUM) within a single year itself. This is a staggering number by any account. It is encouraging to see investors increasing their participation at this opportune juncture in the markets and economic performance of the country, and it augurs well for the industry, for investors and the markets,” said Aashish P. Somaiyaa, chief executive officer, White Oak Capital Management Ltd.

The inflow into equity MF schemes is also led by new fund offers (NFOs) launched in December. Overall, there were six NFOs in equity oriented schemes in the month—three each from multi-cap and sectoral/thematic funds—cumulatively garnering assets worth ₹12,446 crore, almost half the month’s inflow.

A correction in markets in November provided a window of opportunity for investors to enter the markets through the mutual fund route, experts said. The benchmark Sensex and Nifty gained around 2% in December after a fall of 4% in November amid concerns around the Omicron variant of covid, faster-than-anticipated policy normalization by the US Federal Reserve and consequent rising bond yields.

“Despite the concerns over Omicron, the growth outlook over the long term remains strong. Also, the perception that despite intermittent corrections, the markets would continue to surge would have prompted many investors to make the most of the recent dip in the markets,” said Himanshu Srivastava, associate director-manager research, Morningstar India.

As of 31 December, net AUM was at ₹37.7 trillion, while the number of folios stood at 120 million. According to Amfi, net inflows for all categories of open-ended schemes was positive during December, except income/debt-oriented schemes, which saw some outflow.

Even within the closed-ended category, for the first time this fiscal, the income/debt-oriented schemes, led by fixed-term plans, have shown positive flows of ₹180.37 crore compared to ₹6.97 crore in November.

N.S. Venkatesh, chief executive, Amfi, said, “2021 has been a momentous year, with mutual funds emerging as the preferred investment destination with continued record equity flows through NFOs and ongoing investment into existing schemes. SIP has been the favourite medium of consistent investing and disciplined mode of savings by the common man. This is evident from the number of accounts rising. Through regular financial literacy, retail investors understand the nuances of managing market volatility and risk adjustment through SIP. Overall, 2021 has ended in a rise in disciplined investing through a rise in the number of SIP investments.”