 "mutual funds, MFs")
Liquid mutual fund outflow in March stands at Rs 157,970.38 crore, as per Amfi data. This is the sharpest reversal in trend from the February data, when investors poured in Rs 83,642.33 crore in the liquid mutual funds.
Liquid mutual funds invest money in debt instruments like government securities, commercial papers and treasury bills that mature in 91 days. Hence, these instruments are less prone to risks associated with interest rate change. ''The Finance Act 2023 took away the favourable rate of taxation on debt funds which was 20 per cent with indexation for debt funds were purchased before 1 April 2023. Now that investment in debt funds including liquid funds is taxed at your nominal rate of tax, this category is losing its sheen. A lot of the banks had increased fixed deposit rates and interest rates, including SBI, in the month of march to cater to demand from institutions who may want to withdraw their money from funds and park it in their bank accounts, maybe the idea was to get more money back from debt funds into short term deposits and bank deposits which had earlier lost market share to these funds.'', said Rajat Shama, Founder Sana Securities.
In terms of debt-oriented schemes, the whole segment took a beating as investors took out Rs 198,298.90 crore in total, contrary to the Rs 63,808 crore inflow in February 2024. Long Duration Fund and Gilt Fund with 10-year constant duration, were the only exception in the debt mutual fund category, with 772.29 crore and Rs 58 crore inflow respectively. ''I think a lot of this money has completed 3 years of investment period. Selling these investments this year would attract virtually no capital gains on profits given their subdued performance over the last few years. Going forward, I expect to see a lot of this money flow into hybrid category with 40-60 per cent held in equity (including the arbitrage element) since this category is still taxed as before with long term capital gains being taxed at a favorable rate of 20 per cent with the benefit of indexation.'', Sharma added.
Equity mutual funds
The equity mutual fund also showed a sharp reversal trend in the smallcap segment. Investors took out Rs 94 crore in March, while February inflow stood at Rs 2,922.45 crore. The inflow in the index fund stood at Rs 1,822.41 crore, registering a decline of 28 per cent from the February inflow when it stood at Rs 2,536.37 crore. ''Recently, Sebi had mandated AMCs to disclose stress test results for the midcap and smallcap funds every 15 days. Additionally, some found houses have also opted to stop lumpsum investments and keep only the SIP/STP/Switch option open for further investments in their smallcap and midcap funds. Both of these reasons have culminated into these categories witnessing a sharp dip in net inflows. Investors should note that while both the midcap and the smallcap categories have the potential to deliver good returns, these categories inherently are volatile with sharp drawdown risks.'' said Melvyn Santarita, Analyst, Morningstar Investment Research India.
However, investors continued to remain positive on the large & midcap segment. They invested Rs 3,215.58 crore in March, up 1.8 per cent from the February inflow. “'Open ended equity fund schemes garnered Rs 22,633 crore, continuing the third month of netflows greater than Rs 20,000 crore but 16 per cent down from February. Sectoral or thematic funds saw the highest flows at Rs 7,918 crore, followed by Rs 2,738 crore into flexi cap funds,” said Gopal Kavalireddi, vice-president, research, FYERS.
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Hybrid & NFOs decline
Hybrid funds also saw a sharp decline with Rs 5,583.62 crore inflow, down by 69.15 per cent from the February inflow. “With strong moves in commodities, real estate and equity markets, investors continue to opt for multi-asset allocation funds, pouring in Rs 2,681 crore in March. The asset under management of the hybrid schemes category was at Rs 7.22 trillion”, Kavalireddi added.
“New fund offerings (NFOs) were also on the downtrend, mobilising only Rs 4,146 crore from 21 schemes. Five sectoral/ thematic funds launched by asset management companies line Baroda BNP Paribas, Canara Robeco, Edelweiss, Kotak and Union, collected Rs 3,074 crore. Systematic Investment Plan (SIP) monthly inflow was at Rs 19,270 crore, continuing the strong inflow exhibited since the beginning of FY24. Total SIP contribution stood at Rs 1.99 trillion, an uptick of 27.7 per cent over the previous year”, Kavalireddi said.
ETFs
The Gold ETF inflow in March witnessed a sharp decline at Rs 373 crore, down from Rs 997 crore inflow in Febreuary, ''This was the twelfth consecutive month in which the category has garnered net inflows. Recently Gold prices in US Dollar terms as well as Rupee terms has scaled new highs. With ongoing geo-political tensions, US inflation still higher than the desired number, the appeal of Gold as a safe haven and hedge against inflation is expected to continue.'' Melvyn Santarita, Analyst, Morningstar Investment Research.
ETFs
The Gold ETF inflow in March witnessed a sharp decline at Rs 373 crore, down from Rs 997 crore inflow in Febreuary, ''This was the twelfth consecutive month in which the category has garnered net inflows. Recently Gold prices in US Dollar terms as well as Rupee terms has scaled new highs. With ongoing geo-political tensions, US inflation still higher than the desired number, the appeal of Gold as a safe haven and hedge against inflation is expected to continue.'' Melvyn Santarita, Analyst, Morningstar Investment Research.
