Equity mutual fund inflows jump in March, but industry AUM stays flat. Here’s why

The assets under management of Indian mutual funds remained flat at Rs 37.56 trillion at the end of March 2022 compared with a month before, as strong inflows in equity schemes were offset by heavy outflows from debt funds.

Net inflows into equity mutual funds jumped to Rs 28,463 crore in the last month of the financial year 2021-22 from Rs 19,705 crore in February and Rs 14,887.7 crore in January, according to data from the industry group Association of Mutual Funds in India (AMFI).

Debt funds, however, recorded massive net outflows of Rs 1.15 trillion, compared with outflows of Rs 8,274 crore in February.

Hybrid funds—schemes which invest across equity, debt and gold— also recorded net outflows during March with pulling out Rs 3,603 crore.

Systematic investment plans (SIP) continued to be the favoured mode of investments for retail investors. The number of SIP accounts, which went past 5 crore in January, increased further to 5.27 crore in March. The amount collected via SIPs increased to Rs 12,327 crore in March from Rs 11,438 crore in the previous month. This shows that retail investors are understanding the nuances of managing market volatility and risk adjustment.

Equity schemes

All equity fund categories recorded net inflows in March, AMFI data show. Multi-cap funds, a recent favourite of many investors, topped the charts in March thanks to SBI MF’s new fund offer that mopped up Rs 8,170 crore in January. The total net inflows in multi-cap schemes, which must invest at least 25% each in large, mid and small-cap stocks, was Rs 9,694 crore.

Large cap, and large and mid-cap schemes gathered more than Rs 3,000 crore each in net inflows during the month. Tax-saving schemes mobilized Rs 2,676 crore while flexi-cap schemes—the all-time favourites for many investors—received net inflows of Rs 2,549 crore.

Mid-cap and focused funds received net inflows of over Rs 2,000 crore each. Thematic and sectoral funds got net inflows of only Rs 307 crore, compared with Rs 3,441 crore in February, indicating that the market volatility is prompting investors to prefer more diversified funds.

Hybrid funds

Among hybrid funds, balanced advantage schemes retained their pole position with net inflows of Rs 1,719 crore in March. Balanced advantage funds have been an investor favourite in recent months as equity markets trade at record highs. Aggressive hybrid funds got net inflows of Rs 1,156 crore.

However, arbitrage funds recorded net outflows of Rs 6,796 crore during March. This led to the overall hybrid fund category recording net outflows.

Index funds, which include both debt and equity schemes, mopped up Rs 12,313 crore thanks partly to 15 NFOs. Non-gold ETFs recorded net inflows of Rs 6,906 crore.

Debt funds

Among debt funds, all 16 categories recorded significant net outflows. This could be because investors shuffled their portfolios in anticipation of a rise in interest rates in coming months and because of financial year-end changes.

Liquid funds recorded highest net outflows of Rs 44,604 crore. This was followed by overnight funds with Rs 12,852 crore and corporate bond funds with Rs 11,967 crore.

Next on the list were short-duration schemes with outflows of Rs 9,055 crore and low-duration funds with net outflows of Rs 8,946 crore. Banking and PSU funds recorded net outflows of Rs almost 8,000 crore.