Multicaps lead third straight month of equity scheme outflows in September

Industry AUM slips below Rs 27 trn in September

Equity outflows continued for the third straight month in September, led by outflows in multicap funds, which had seen a rejig in category definitions.

Net outflows tapered to about Rs 1,000 crore (including closed-end schemes) in a month, when benchmark indices retreated 1.2 per cent. This is lower than the Rs 4,029 crore and Rs 3,845 crore of outflows seen in the previous two months. Outflows were led by multicap schemes to the tune of Rs 1,143 crore, taking the category’s total outflows to over Rs 4,000 crore during the past four months. Large cap funds saw outflows of Rs 576 crore.

“The number of folios and funds mobilised during the month was higher than in August, and the redemption amount too came down. This indicates that while some investors chose to book profit given the surge in equity markets across segments in the recent times, there is a set of investors that has started investing in the markets as well. The markets also corrected mid-month, which would have also given a good investment opportunity for investors,” said Himanshu Srivastava, Associate Director–Manager Research, Morningstar India.  

Redemption in equity schemes amounted to Rs 17,686 crore in September, 4.7 per cent lower than the Rs 18,558 crore of redemptions in the previous month. Contribution from systematic investment plans (SIP) declined marginally to Rs 7,788 crore.

N S Venkatesh, chief executive, Association of Mutual Funds in India (Amfi), said:“In the previous two months, investors were either booking profits or reacting to negative newsflows. With market conditions stabilising and the likelihood of an economic stimulus package this financial year, investors are returning to the equity market.”

“Suggested changes by the regulator in the multi cap category has possibly led to some opportunistic buying in small and midcap funds. Better sales numbers in equity MFs could also be a function of markets recovering back to pre-covid levels, early signs of an impending economic recovery thus leading to increase in investors’ appetite for equities,” added Akhil Chaturvedi, Associate Director and Head of Sales and Distribution, Motilal Oswal Asset Management Company.

Last month, the regulator asked mutual funds to realign their multicap portfolios to ensure 25 per cent allocation each in large, mid and small caps, respectively.

Hybrid funds saw outflows for the third consecutive month, led by net ouflows of Rs 2,004 crore and Rs 1,732 crore in balanced/aggressive hybrid and arbitrage funds. Total outflows in the hybrid category in the last three months amount to over Rs 15,000 crore. Arbitrage funds, which are part of the hybrid category, but are treated as equity for taxation purposes, have seen sustained outflows since July, primarily on account of dwindling returns. Some of this money could have moved to debt funds.

Liquid funds saw outflows of nearly Rs 66,000 crore as corporates withdrew money to meet their advance tax requirements for the quarter. Ultra-short term and money market funds saw outflows of over Rs 4,800 crore each. Banking and PSU Funds saw the highest flows in the debt category of Rs 6,415 crore.

“Regular investing through the SIP route has remained robust. This is demonstrated by the healthy growth in number of SIP folios as well as by the monthly flows which seems to have stabilized. The number of folios in the industry as a whole and specifically in equity funds has also gone up significantly. On the fixed income side there appears to be preference for schemes with good credit quality which can offer reasonable returns,” said G Pradeepkumar CEO Union AMC.

Overall industry folios grew 0.8 per cent to 93.3 million. Total AUM for the MF industry stood at Rs 26.85 trillion at the end of September, down 2.3 per cent from Rs 27.49 trillion at the end of the previous month.