Equity MFs inflows dip 44% month-on-month in April as volatility bites

Geopolitical tension due to Russia- Ukraine war, concerns over surging crude prices and uptick in domestic inflation have weighed on market performance in recent months

Inflows into equity-oriented mutual fund (MF) schemes fell 44 per cent month-on-month to Rs 15,890 crore in April amid a sharp spike in volatility due to inflationary fears globally.

“The lower quantum of net inflow from the previous month could be attributed to investors going slightly cautious with their investments given the ongoing challenges to the investment environment. This is evident from a comparatively lower quantum of funds mobilised in April compared with March,” said Himanshu Srivastava, associate director – manager research, Morningstar India.

Geopolitical tension due to the war between Russia and Ukraine, coupled with concerns over the surging crude prices as well as uptick in domestic inflation, has weighed on market performance in recent months, resulting into poor performance of equity schemes.

The continuous selling by foreign portfolio investors (FPIs) on the back of concern over more aggressive rate hikes by the US Fed going ahead have also led to a de-rating in several stocks.

After witnessing wild swings, the BSE Sensex Index lost 2.57 per cent, while BSE Midcap Index and BSE Smallcap Index gained 1.29 per cent and 1.40 per cent, respectively in April. Stocks have seen a sharper correction this month.

The contribution through the systematic investment plan (SIP) route came in at  Rs 11,863 crore in April, Rs 465 crore compared to March. Total assets under management of SIP were at Rs 5.78 trillion in April as against Rs 5.76 trillion in March.

Market participants feel that corrections in the market could be a good starting point for the investors who want to start investing into the equity funds.

NS Venkatesh, chief executive, Amfi said, “It has been a good start to the new fiscal FY23 with net flows for overall mutual funds schemes in the positive territory and continued positive equity flows for consecutive 12 months. Despite market volatility in April 2022, retail investor trust on MF asset class continues to be strong, as reflected by the 36 per cent year-on-year rise to an all-time high retail AUMs.”

Debt funds saw net inflows of Rs 54,757 crore in April thanks to huge mobilisation by liquid funds, ultra-short duration funds and money market funds. Inflows into hybrid funds –which invests in a mix of debt and equity--nearly doubled to Rs 7,240 crore in April compared to Rs 3,640 crore in March.

Exchange traded funds (ETFs), index funds and overseas funds saw net inflows of Rs 15,887.74 crore. Overall the industry saw net inflows of Rs 72,845 crore while average net assets under management of the industry stood at Rs 38.9 trillion.