Equity MFs log Rs 5,215-crore inflow in Oct amid rally in markets

Positive sentiments and rallies in the equity markets helped equity-oriented mutual funds to attract Rs 5,215 crore in October, making it the eighth consecutive monthly net infusion.

However, the quantum of net inflows dropped from September, when it attracted Rs 8,677 crore, data with the Association of Mutual Funds in India (Amfi) showed on Wednesday.

"This decline could be a result of investors booking profits with markets trading near all-time highs.

"Also, many investors would have chosen to stay on the sidelines given higher valuations. This is evident as the fund mobilised fell from Rs 36,656 crore in September to Rs 28,671 crore in October," said Himanshu Srivastava, Associate Director - Manager Research, Morningstar India.

Akshat Garg -- Manager, Research Investica - a platform for investing in mutual funds also attributed the decline in net inflows to profit booking.

"Broadly mood to invest in equities continues with positive net sales in pure equity funds of Rs 5,200 crore. However, at the same time, we do see an element of profit booking with higher absolute redemption of Rs 23,500 crore," Akhil Chaturvedi, Chief Business Officer, Motilal Oswal AMC, said.

According to Morningstar India's Srivastava, positive sentiments and rallies in the equity markets continue to attract investors into equity-oriented mutual funds in October as well.

Equity schemes have been witnessing a net inflow since March this year and the segment has received a net inflow of Rs 73,766 crore during this period, highlighting the positive sentiments among investors.

Before this, such schemes had consistently witnessed outflows for eight months from July 2020 to February 2021, losing Rs 46,791 crore.

The inflow pushed average assets under management (AUM) of the mutual fund industry to an all-time high of Rs 38.21 lakh crore at October-end from Rs 37.41 lakh crore at September-end.

Within the equity segment, almost all categories saw net inflows, except the value and equity-linked saving scheme (ELSS) categories in October. Healthy inflows were observed in sectoral/thematic, Flexi Cap, Large Cap, Focus and Large & Mid Cap segments.

Apart from equities, the hybrid category saw net inflows to the tune of Rs 10,437 crore compared to Rs 3,587 crore seen in the previous month.

In the current market condition, the Dynamic Asset Allocation /Balanced Advantage Fund category emerged as a clear-cut winner, as it has garnered Rs 11,219 crore during the month under review.

"This strategy (DAA/BAF) enables material participation in the upside of equities while limiting volatility, thereby offering a superior risk-adjusted return compared to pure equity mutual funds. Investors are increasingly getting discomfort to put money in pure equity mutual funds at this level of the market," Sanjiv Bajaj, Jt. Chairman and MD, Bajaj Capital, said.

In addition, the Fund of Funds, Index Funds and ETFs too reported positive flows and collectively reported positive flows to the tune of Rs 10,759 crore in October.

Besides, monthly SIP contribution too reached an all-time high at Rs 10,518 crore during the period under review from Rs 10,351 crore in September.

"Net positive flows during October 2021, in all categories of open-ended mutual fund schemes, be it debt, equity, hybrid, solution-oriented, or index, FoFs or ETFs coupled with continued buoyancy in SIP flows, at historic high, have peaked overall Indian MF Industry AAUMs to an all-time high," N S Venkatesh, Chief Executive, AMFI said.

The debt segment saw net inflows to the tune of Rs 12,984 crore after seeing a net withdrawal of Rs 63,910 crore in September.

"The month of October witnessed inflows of over Rs 12,000 crore, in schemes like Floating rate funds, low duration and ultra-short funds. Investors were dissatisfied with the low returns in liquid funds as short-end yields rose due to expectations of monetary policy normalisation and IPO funding by NBFCs," Sandeep Bagla, CEO, Trust Mutual Fund, said.

Overall, net inflow in the mutual fund industry was registered at Rs 38,275 crore last month compared to the net outflow of Rs 47,257 crore seen in September.