Equity oriented mutual funds in March witnessed the first month of positive net inflows after eight continuous months of net outflows. The March 2021 inflow number was at a healthy Rs 9,115 crore, thanks to robust sales of sectoral/thematic, ELSS, midcap, flexicap and focussed schemes. The total AUM of equity funds stood at Rs 9.79 lakh crore across 344 schemes and 6.57 crore folios.
“Net Flows were witnessed across equity fund categories. While itâ€™s too early to make any conclusions, it seems like equity investors waiting on the sidelines for a market correction, have started making allocations taking a long-term investing view on equities, as should be the case. Additionally the quantum of redemptions were lower for the month, suggesting profit booking/reallocation to other asset classes slowed down,” says Kaustubh Belapurkar, Director â€“ Manager Research, Morningstar India.
Explaining the March data, Akhil Chaturvedi, Head of Sales & Distribution, Motilal Oswal Asset Management Company said the industry has seen a reversal in trend of negative sales for past several months into positive sales for the month of March 2021 including hybrid schemes.
“Higher gross sales and lower redemptions for the month is clearly an outcome of faith in subsiding of fear of Covid led slowdown in economy to V shaped recovery in many sectors across the economy. The markets have also been consistently holding up to its gains and really not giving any major correction which investors were looking out for. Lower interest rates and lack of better investment options will certainly bring appetite for equity asset class back and this perhaps could be the turning point in sales trend for equity mutual funds,” added Chaturvedi.
In fixed income schemes, March saw the typical redemptions associated with the quarter end. Put together, fixed income funds as a category saw Rs 52,528 crore net outflows in March 2021. This was driven by redemptions in liquid funds, low duration funds, banking psu funds and money market funds.
“Funds at the shorter end of the curve (Liquid, Low Duration, Ultra Short Duration, Money Market) witnessed outflows as is typically observed during quarter end. Banking & PSU funds witnessed a fair bit of outflows as a result of the new guidelines around valuations and fund exposure norms for AT1 bonds. Floater funds continue to receive net positive flows given the limited probability of interest moving down significantly,” pointed out Belapurkar of Morningstar India.
However, corporate bond fund, dynamic bond and floater fund have seen positive flows owing to investors preferring to take advantage of the flexibility offered by the duration strategy, and RBI preferring accommodative stance to help pursue growth over inflation.
Gold ETFs continue to receive steady inflows from investors. Investors are steadily acknowledging the need for adding gold as a diversifier in portfolios. March 2021 saw a healthy Rs 662 crore net inflows in gold ETFs. In fact, ETFs of all categories have seen positive flows and this list includes other ETFs (Rs 3632 crore).
For FY21 as a whole, MF Industry AUM touched a historic high of Rs 32.17 lakh crore as on March 31, 2021, rising 30 per cent as compared to Rs 24.70 lakh crore as on March 31, 2020.
“I want to reinforce that mutual funds continue to be preferred investment vehicle to build long term goal-based wealth creation, as is reflected from the number of unique investors across schemes increasing in the last one year, by 10 per cent from 2.08 crore as on March 31, 2020 to 2.28 crore as on March 31, 2021,” said AMFI Chief Executive NS Venkatesh.