Investors pour Rs 15,700 crore into equity mutual fund schemes in Feb

February inflows most in nine months, debt schemes continue to struggle

The net investments into equity mutual fund (MF) schemes rose to a nine-month high of Rs 15,700 crore in February. Inflows were underpinned by robust collections by new fund offerings (NFO) and higher inflows across sub-categories, shows the latest data from the Association of Mutual Funds in India (Amfi).

The investments were s in line with the recent trend of retail investors stepping up their buying during phases of market corrections.

"Despite the fall in the markets, investors seem to be making conscious decisions, with their overall preference towards investing in dips becoming evident. Domestic investors continue to place confidence in the market, as broader economic indicators remain favourable towards the India growth story. This is despite the FII (foreign institutional investors) selling that we’ve witnessed in the market over the past month," said Kavitha Krishnan, senior analyst, Morningstar India.

Last month, the market went through a turbulent period with key indices falling for six straight sessions in the latter part of February. The Nifty50 ended the month two per cent lower as the market corrected over concerns around rate hikes, high inflation, signs of global slowdown and a slump in Adani Group stocks.

Meanwhile, equity MF inflows through the systematic investment plans (SIPs) recorded a monthly dip, albeit marginally, for the first time in the last six months to Rs 13,686 crore in February.

"Due to the fact that February has only 28 days, there is a dip seen in SIP contribution numbers as the flows are not recorded for the full month," said N S Venkatesh, chief executive officer, Amfi.

The SIP inflows have mostly remained above Rs 10,000 crore since September 2021, allowing fund managers to deploy record sums in the equity market. As a result, the net investments by MFs in equities have now remained above Rs 1.5 trillion for two consecutive financial years.

The continued MF investments in equities has kept the Indian market stable for the last one year even as foreign portfolio investors have pulled out huge sums of money.

Among equity funds, sectoral schemes recorded the highest net inflows at Rs 3,856 crore. There were two fund launches in the category — Axis Business Cycle Fund and Kotak Banking and Financial Services Fund — and they together received investments of Rs 2,540 crore. Overall, NFOs in the active equity space garnered more than Rs 5,000 crore.

However, debt schemes' wait for a change in fortunes continued in February despite a substantial rise in yields in recent months and rate hike cycle nearing the end.

The latest data shows that investors withdrew a net of Rs 13,800 crore from debt funds in the month, with liquid funds and ultra-short duration schemes seeing net outflows of Rs 11,300 crore and Rs 2,430 crore, respectively. Owing to the continued outflow, the assets under management (AUM) of debt schemes is down over 10 per cent in the last one year. to Rs 13 trillion.

"While equities witnessed incremental net inflows during the month, outflows from debt funds persisted. A significant outflow from the category can be attributed to financial management exercises by institutional investors like banks and corporate treasuries as we approach the fiscal year-end," said Anand Dalmia, co-founder & chief business officer, Fisdom, a wealthtech platform.

Owing to the market correction and debt fund outflows, the monthly average net AUM of the industry declined to Rs 40.7 trillion in February, from Rs 40.8 trillion in January.

The retail AUM for equity, hybrid and solution-oriented schemes stood at Rs 20.3 trillion. The folio (MF investment accounts) count rose to 144 million. Also, the SIP AUM rose to Rs 6.74 trillion in February compared to Rs 6.73 trillion in January.