How Mutual Fund flows panned out in November 2022?

On Friday 09th December 2022, AMFI reported detailed data on gross and net flows into various mutual fund categories. There were broadly some trends that have been seen in the last 2 years and that has only got underlined in the month of November 2022. For instance, there continues to be a steady growth in the number of mutual fund investors as measured by the number of folios, which shows the retail spread. Secondly, NFOs are back in action with flows of Rs. 7,191 crore in November. However, most of the NFO flows are coming from Fixed Maturity Plans, sector funds and index funds. SIPs have come of age in a big way as measured by the AMST. SIP net flows in November were at a record Rs. 13,306 crore.

What we read from the AMFI mutual fund flow data for November 2022?

Here is what we gathered from the mutual fund flow data for November 2022.

1. Even through the smaller stocks may still be short of their previous highs, the Nifty and the Sensex have already touched new highs. That has resulted in assets under management (AUM) of Indian mutual funds traversing beyond Rs. 40,00,000 crore. This AUM was spread across close to 14 crore folios as of the close of November 2022.
    

2. NFO flows were only permitted after a gap from July 2022 onwards. The new fund offerings have picked up sharply to Rs. 7,191 crore, of which Rs. 3,703 crore was accounted for by fixed maturity plans (FMPs) as investors locked into high bond yields for a period of over 3 years. Other than FMPs, the NFO flows were concentrated in sector funds and index funds (since both don’t have any AMC level limit on the number of schemes).
    

3. Over the last 1 year, the AUM dominance has been moving out of debt funds and into equity funds. That is evident from how the AUM of equity funds and debt funds have changed over the last one year. Sample these. Between November 2021 and November 2022, AUM of debt funds fell from Rs. 14.52 trillion to Rs. 12.57 trillion. This was offset by AUM of equity funds expanding from Rs. 12.78 trillion to Rs. 15.58 trillion. Equity fund AUM has gained from positive equity markets and negative bond price movements.
    

4. For a long time, Indian mutual fund segment was largely about equity funds and debt funds only. Now a new category of alternate funds are growing in heft and now account for 30% of the total mutual fund AUM. Alternate categories include hybrid funds, passive funds and solutions funds. The big success story has been passive funds, which saw its AUM surge from Rs. 9.42 trillion in November 2021 to Rs. 11.93 trillion in November 2022.
    

5. Let us first talk about active flows into equity and debt funds in November 2022. Debt funds saw marginal inflows of Rs. 3,669 crore while equity funds saw smaller inflows of Rs. 2,258 crore on a net basis. Within debt funds, overnight funds, ultra-short term funds and short duration funds saw net buying while liquid funds, money market funds and corporate bond funds saw net selling. Equity funds saw net buying in sectoral funds and small cap funds while large cap funds multi-cap funds and ELSS saw net outflows.
    

6. Let us now look at flows in hybrid funds and passive funds in November 2022. Overall hybrid funds saw net outflows of Rs. 6,477 crore while passive funds saw net inflows of Rs. 10,394 crore in November 2022. Within hybrid funds, bulk of the net selling of Rs. 4,075 crore was seen in arbitrage funds followed by balanced advantage funds (BAFs). Within passive funds, index funds and index ETFs on debt and equity indices saw bulk of the inflows while gold funds witnessed outflows.
    

7. Let us now move to the all-important systematic investment plans (SIPs), that have become the backbone of mutual fund flows in the last few years. Total net SIP flows stood at Rs. 13,306 crore for November 2022. The annualized SIP flows in the current year are higher by 21% compared to FY22 and substantially higher by 57% than FY21. This has also led to a three-and-half time surge in the average monthly SIP ticket (AMST) since FY17. SIP stoppage ratio is better than FY20 and FY21, but worse than FY22.
    

8. Finally, let us take a quick look at the SIP folios and SIP AUM which gives a better idea of the retail spread of SIPs as an investment solution. The SIP folios increased by 1.90% from 593.30 lakhs in October 2022 to 604.57 lakhs in November 2022. While SIP folios crossed 6 crore for the first time, the SIP AUM has gotten closer to Rs7 trillion.

What is the big picture on mutual fund flows. India has 6 crore SIP folios and 14 crore overall folios. While numbers are impressive, it is just scratching the surface of a country with a population of 140 crore. Also, India has about 25 crore insurance policies, over 50 crore bank accounts and over Rs. 110 crore mobile phones. That should be the next target for AMFI and the AMCs to strive for to give Indian mutual fund flows the big leap.