Net equity mutual fund inflows dive 44% in April

Net inflows into equity mutual funds fell 44% in April from the preceding month as the Russian invasion of Ukraine, soaring oil prices and aggressive monetary-policy stances of central banks soured investors’ sentiment.

Equity funds saw net inflows plunge to ₹15,890 crore in April from ₹28,464 crore in March, data released by the Association of Mutual Funds in India (Amfi) on Tuesday showed. However, inflows into debt mutual funds remained robust as investors rebalanced their portfolios.

Investors turned cautious because of the geopolitical tensions, surging crude prices, and the domestic inflation uptick.

“This is evident from a comparatively lower quantum of funds mobilized in April. The inflow amount, though lower, is significant nonetheless in absolute terms. After witnessing a sharp run-up in the markets in the last few years, the recent correction provided investors with a good buying opportunity, which they have been capitalizing upon,” said Himanshu Srivastava, associate director–manager research at Morningstar India.

The data showed that monthly systematic investment plan (SIP) contributions fell to ₹11,863.09 crore in April from the record ₹12,327.91 crore in the previous month. However, the number of SIP accounts hit a new high of 53.9 million in April from the previous record of 52.7 million in the previous month.

Overall, it was a good start to the new financial year for the Indian mutual fund industry, with net inflows of ₹72,847 crore during April. Fresh inflows into debt-oriented schemes stood at ₹54,756.60 crore.

The net assets under management (AUM) of the Indian mutual fund industry rose 17% from a year earlier to a record ₹38.03 trillion as of 30 April.

“Despite market volatility in April, retail investor trust on mutual fund asset class continues to be strong. We see investors continue with their SIP (systematic investment plan) mode of investments on the equity side and reallocate their savings in debt funds more towards shorter duration schemes owing to the recent hike in rates by the Reserve Bank of India,” said N.S. Venkatesh, CEO, Amfi.

Amfi data also showed that the number of mutual fund folios rose 33% from a year earlier to an all-time high of 131.3 million. The number grew 1% sequentially from 129.5 million in March.

In the debt category, liquid, money market and ultra-short duration funds emerged as the top three choices for investors. In the equity category, large, mid-cap, small-cap, flexi-cap, mid-cap and multi-cap witnessed significant flows. In the hybrid category, arbitrage and dynamic asset allocation schemes saw significant inflows.

In April, three new fund offers were launched under the open-ended schemes category, mobilizing at ₹3,240 crore.

“Though lower than last month (March), which may be due to new fund offer (NFO) allotment, SIP flows are holding strong, which is also very positive. It will be interesting to see ongoing investment trends, given the intensity of volatility is very high. I do expect the positive trend to continue going forward, though,” said Akhil Chaturvedi, chief business officer at Motilal Oswal Mutual Fund.