Equity MFs see net inflows for second month but Rs 5.6K crore less

Experts blame the Covid wave for the decline in April; redemptions come down

Equity funds witnessed net investor inflows for the second consecutive month in April but the quantum fell sharply compared to March. 

Equity-oriented schemes saw net inflows of Rs 3,437 crore in April against Rs 9,115 crore in March, when flows had turned positive after a gap of eight months, according to the data from the Association of Mutual Funds in India (Amfi). 

Market participants said a smaller tally in April was largely due to the disruption caused by the second wave of the Covid-19 pandemic. They are of the view that the worst is over for equity fund flows as redemptions have sharply come down over the past few months.

Sunil Subramaniam, managing director, Sundaram Mutual, said: “Despite the second wave of novel Coronavirus hitting hard in April, flows have been holding up. Even redemptions have come down in the past few months and that means the number of investors booking profits has reduced a lot, and there is no panic.”

In April, gross inflows into equity funds stood at Rs 22,077 crore, while redemptions stood at Rs 18,694 crore. Even in March, redemptions in equity funds were worth Rs 18,908 crore, shows the data from Amfi.

“The fund mobilised was lower than that in March, suggesting some investors would have preferred to stay on the sidelines until more clarity emerges on the impact of the second wave of the pandemic on the economy. Additionally, a few investors would have also held back their investments in anticipation of a market correction, given the ongoing concerns,” said Himanshu Srivastava, associate director-manager research, Morningstar India.

Seven of 11 sub-categories of the equity segment saw net inflows, with sectoral funds witnessing the most -- Rs 1,705 crore. Mid-cap, and large- and mid-cap saw net inflows of Rs 958 crore and Rs 708 crore.

Overall, net assets under management (AUM) of equity-oriented schemes stood at Rs 9.91 trillion.

Investments through systematic investment plans (SIPs) also saw a drop in April at Rs  8,590 crore against Rs 9,182 crore in March. The SIP AUM rose to Rs 4.34 trillion. Other categories like hybrid schemes, and passive schemes reported sharp positive flows.

Arun Kumar, head of research, FundsIndia, believes risk to flows into equity funds is a sharp correction in the equity markets. “Overall while the inflow trend remains positive, the recent spike in Covid-19 cases is a concern and we need to monitor the impact on investor sentiment and behaviour in the near term,” he said.

Debt-oriented schemes also saw net inflows of around Rs  1 trillion crore. The liquid funds category saw positive flows of Rs 41,507 crore, followed by money market funds (Rs  20,286 crore).

The MF industry, overall, reported net money pumped in at Rs  92,906 crore, while total industry AUM stood at Rs 32.37 trillion at the end of April.