After eight months of net outflows, equity mutual funds attracted net inflows of ₹7,376 crore in March, with all categories of open-ended funds barring multi-cap, value and contra funds reporting inflows.
Closed-ended equity schemes, however, saw net outflows of ₹1,739 crore due to maturing of the schemes, data released by the Association of Mutual Funds of India (Amfi) showed. Of the total net inflows, systematic investment plans accounted for ₹9,182 crore in March, a substantial jump over February’s ₹7,528 crore.
Total flows into equity funds were the highest since March 2020. However, according to N.S. Venkatesh, chief executive officer, Amfi, some of these inflows were due to holidays at the end of February, which shifted flows of around ₹500 crore to March.
Open-ended debt mutual funds, on the other hand, saw net outflows of ₹52,528 crore, led by short-term debt categories like liquid funds, ultra-short duration funds, low duration funds, money market funds and short-duration funds. Some of these outflows are seasonal, as corporate treasuries pull out funds to pay advance tax in March.
There were, however, positive flows of ₹956.92 crore in close-ended debt funds, mostly driven by launches of fixed maturity plans. Banking and PSU debt funds saw net outflows of ₹6,508 crore, some of it likely due to the recent uncertainty over additional tier-1 (AT-1) bonds, Venkatesh said. A Securities and Exchange Board of India circular on AT-1 bonds last month had created fear of schemes with such bonds having to value their holdings lower after treating them as having a maturity of 100 years. However, in a subsequent circular, the regulator allowed mutual funds to gradually move towards the 100-year rule.
March also saw the launch of debt index funds, which attracted net inflows of ₹2,126 crore. Apart from equity and debt, open-ended hybrid funds also saw net inflows of ₹6,210.05 crore, led by arbitrage and balanced advantage funds.
“People are coming to terms with the new market levels,” said Swarup Mohanty, chief executive officer, Mirae Asset Mutual Fund, suggesting greater investing comfort with market valuations after the covid-19 outbreak. “While it’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,” said Kaustubh Belapurkar, director-manager research, Morningstar India.