Inflows in equity schemes dip 40% in October amid rally in markets

Number of SIP accounts at a record high of 46.4 million in October

Positive market sentiment and a sustained rally continued to attract investors towards equity-oriented and hybrid mutual funds in October. But the quantum of net inflows for the month in equity schemes stood at Rs 5,215 crore, 40 per cent lower than the flows witnessed in the previous month, possibly due to some profit-booking given the rich valuations.

All schemes, barring ELSS and value/contra schemes, reported positive flows in the equity-oriented category. This was the eighth consecutive month of net inflows for the category, with inflows since March totalling Rs 73,766 crore. Before that, equity-oriented funds witnessed net outflows for eight straight months, from July 2020 to February 2021, totalling Rs 46,791 crore.

Flows into hybrid schemes stood at Rs 10,437 crore in October, up 190 per cent over the previous month. Total flows into this category in FY22 (until last month) stood at Rs 79,431 crore.

Fund of funds, index funds and ETFs, too, reported positive flows in October — collectively to the tune of Rs 10,759 crore as of October 31, 2021.

N S Venkatesh, chief executive, Association of Mutual Funds in India (Amfi), said: “It is heartening to see investors sticking to making matured choice by opting for schemes that offer prudent mix of debt and equity through balanced advantage schemes and flexi-cap schemes, and choosing mutual funds as an investment for long-term financial planning for their own retirement and children’s welfare. This is quite evident from the monthly SIP contribution getting consolidated at record high level of Rs 10,518 crore.”

According to experts, the resumption of business activities and pick-up in the vaccination drive have improved the growth outlook for the economy. This has aided the markets to touch new all-time highs on expectation of a faster economic recovery, thereby sidelining the risk of a possible third wave of the pandemic and other concerns in the interim.

The number of MF folios as on October 31 stood at 114.3 million. The number of SIP accounts stood at an all-time high in October 2021 at 46.4 million, compared to 44.8 million in September.

“The secular bull run in the markets and high returns have attracted several investors towards equity mutual funds, as a means to participate and benefit from the rally in the equity markets. Relatively low returns from traditional investments have also made equity mutual funds attractive investment destinations for investors. Additionally, with the SIP book growing consistently, equity-oriented funds have been receiving robust flows since March 2021,” said Himanshu Srivastava, associate director-manager research, Morningstar India.

The equity markets had turned choppy, particularly during the second half of October amid concerns around expensive valuations.

“Higher net flows in the hybrid and balance advantage category signifies that retail investors are taking a cautious view at current market levels. This strategy is a good way to ensure adequate exposure to equities so as to not miss out from any upside and at the same time have enough cash to deploy in the event of any meaningful corrections,” said Akhil Chaturvedi, chief business officer, Motilal Oswal AMC.

Debt-oriented schemes saw modest inflows of nearly Rs 13,000 crore, led by inbound money towards overnight funds (Rs 6,337 crore), floater funds (Rs 5,049 crore) and ultra-short duration funds (Rs 4,511 crore).

Average AUM and the net AUM for the Indian MF industry rose to record high levels of Rs 38.2 trillion, and Rs 37.3 trillion, respectively, as of October 31, 2021.