First the good news—equity mutual funds continued to see inflow for the second successive month in April. In the not so good news, the inflow of Rs 3,437.37 crore during the month was 60 percent lower than Rs 9,115.12 crore in March.
Fund managers, however, are not too worried. They see the decline as a result of the rise in COVID-19 cases in the country and the lockdown-like restriction in various states. The net inflows—investments exceeding redemptions—will pick up once the coronavirus situation eases, they say.
“Most of the equity fund categories witnessed net inflows except for the multi-cap fund, dividend yield fund, value fund/contra fund and ELSS funds,” Himanshu Srivastava, Associate Director–Manager Research, Morningstar India, said.
“The quantum of redemption was almost the same as the last month. The fund mobilised was lower than that in March, suggesting some of the investors would have preferred to stay on the sidelines until more clarity emerges around the impact of the second wave of the pandemic on the economy,” he said.
Some investors would also have held back in anticipation of a market correction given the ongoing concerns, he said.
Also Read: Equity fund inflows continue in April; bond schemes, Gold ETFs in demand
The other categories which received significant flows were mid and largecaps. Thematic schemes and mid-cap schemes got inflows of Rs 1,705 crore and Rs 958 crore, respectively
Total assets under management (AUM) for April ended at Rs.32.38 lakh crore, a minor increase in comparison to the fall seen in March where it stood at Rs 32.17 lakh crore.
Contributions through systematic investment plans (SIPs) also slipped in April to Rs 8,590 crore from Rs 9,182 crore in the previous month. In April, the number of SIP accounts outstanding registered was at 3.79 crores compared to 3.72 crore in the previous month, which is a positive sign.
“The net inflows into equity funds have continued in April, which is very encouraging. The SIP numbers have remained robust and the addition of SIP folios also have been very healthy,” G Pradeepkumar CEO Union AMC said.
“Given the expensive valuations, we have been recommending asset allocation funds such as Balanced Advantage Funds (BAF) for investors. This category has also seen meaningful inflows. We expect the flows to pick up pace once the pandemic is brought under control through increased levels of vaccination and other measures,” he said.
Global funds
The Nifty closed flat with a negative bias in April and remained volatile throughout the month compared to the 5 percent rise seen in the US Market (S&P 500).
Fund of Funds offerings continued to interest investors as global equities rise. Fund of Funds investing overseas saw net inflows of Rs 695.34 crore in April compared to Rs 1,776 crore in March.
“The interesting trend of money being allocated to relatively newer categories like international funds and domestic index funds continues to gain traction,” Aashish Somaiyaa, Chief Executive Officer-White Oak Capital said.
Gopal Kavalireddi, Head of Research at FYERS, also said that new Fund of Funds offerings continue to attract investors. “With the second wave of the coronavirus pandemic putting pressure on citizens to hold a higher emergency corpus for medical needs, investor interest is a tad down and can be expected to recover in the waning phase of this health scare,” he said.
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