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Monthly net inflows into equity-oriented mutual fund (MF) schemes declined to 2,224 crore in November, the lowest since April 2021, according to Association of Mutual Funds in India (Amfi) data.

Compared with October, this marked a 76% decline. Net inflows into equity MF schemes had fallen 34% in October. The data includes both open and close-ended schemes.

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Notwithstanding the decline, this was the 21st consecutive month of positive net inflows into equity MF schemes since March 2021. With the markets on the rise, investors took to profit-booking over the past month.

According to Melvyn Santarita, analyst-manager, research, Morningstar India, the stock market continued its stellar run in November as it saw broad-based rallies across large, mid- and small caps. While DIIs (domestic institutional investors) were net sellers of Indian equity, FIIs (foreign institutional investors) returned as buyers in November.

“There have been outflows from retail schemes as people are encashing profits, the reason being increased consumption in festive season,“ said N.S. Venkatesh, chief executive of Amfi.

A steady rise in monthly SIP (systematic investment plan) contributions since August extended into November, too. SIP contributions rose 2% to 13,306 crore in November over October, when SIP collections had first crossed the 13,000 crore mark. “SIP contribution remaining above 13,000 crore indicates better awareness among retail investors about the long-term orientation of equity investments and wealth creation opportunities from India’s growth trajectory," said Akhil Chaturvedi, chief business officer of Motilal Oswal Asset Management Co.

Under equity, large-cap funds and flexi-cap funds had the largest net outflows of 1,039 crore and 863 crore, respectively, in November. Thematic, small-cap and mid-cap funds, however, attracted net inflows of around 1,380 crore, 1,378 crore and 1,176 crore, respectively.

Money garnered through new fund offers helped thematic funds. A correction in small cap valuations seems to have worked in favour of small cap funds. 

“Small cap valuations have taken a beating, so investors see opportunity here and this should continue," said Venkatesh. 

“Given the correction in mid and small caps over the last year, investors have been steadily allocating their money towards this segment of the market, possibly viewing this as a good investment opportunity," said Santarita.

Debt funds (open and close-ended) on the other hand, saw a reversal – from significant net outflows of Rs. 66,483 crore in September, and then of Rs.2,765 crore in October, there were net inflows of Rs. 6,943 crore in November. 

Liquid funds were the biggest recipients of investor money with net inflows of Rs. 34,276 crore in November. However, other categories such as ultra-short duration funds, short duration funds, and banking and PSU Funds experienced net outflows. 

Investors have been taking out money from these funds in anticipation of further rate hikes, after which more money is expected to flow into these schemes. “Debt schemes will stabilise once the RBI rate hikes stabilise," said Venkatesh.

According to Venkatesh, with investors encashing as gold prices were on the rise, Gold ETFs (exchange traded funds) saw net outflows of Rs. 195 crore in November. Under the hybrid fund category, arbitrage funds witnessed net outflows of Rs. 4,075 crore. “Arbitrage funds saw outflows because of lack of arbitrage opportunities between cash and futures markets. Investors have made gains in these funds and are now taking money out," added Venkatesh.

ABOUT THE AUTHOR

Maulik Madhu

Maulik Madhu is a special correspondent at Mint. She started her career at the Competition Commission of India (CCI) and forayed into business journalism in 2012. Choosing to specialize in personal finance, she worked at FundsIndia and The Hindu Business Line, before joining Mint in March 2022.
Catch all the Mutual Fund news and updates on Live Mint. Download The Mint News App to get Daily Market Updates & Live Business News.
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