Equity inflows plunge, SIP count shrinks for second month in February

The decline in net inflows is largely due to a sharp dip in gross inflows from Rs 66,630 crore in January to Rs 54,429 crore in February

Inflows into equity mutual fund (MF) schemes declined 26 per cent month-on-month (M-o-M) in February to Rs 29,303 crore. The net collection, down for the second consecutive month, is the lowest since April 2024.

 

According to MF executives, while the decline in inflows can largely be attributed to equity market volatility, the lower number of working days in February was also a factor.

 

“We observed a paradox of risk, as equity flows dropped by about 25 per cent compared to January. It is important to remember that risk increases as markets rise and decreases when markets fall. However, investor flows often follow their pattern,” said Anand Vardarajan, chief business officer, Tata Asset Management.

 

“The marginal drop in systematic investment plan (SIP) inflows could be attributed to fewer days in the month,” he added.

 

Investors deployed Rs 26,000 crore into MFs through SIPs in February, down from Rs 26,400 crore in the previous month, according to data released by the Association of Mutual Funds in India (Amfi).

 

SIP inflows remained mostly unaffected despite the number of accounts shrinking for the second month in a row. The number of active SIP accounts declined from 102.6 million in January to 101.6 million in February. Of these, 82.6 million accounts contributed to SIP inflows last month. 

 

MF inflows have come under some pressure amid the equity market correction. February’s market selloff was more pronounced than in previous months, with the benchmark Nifty 50 falling nearly 6 per cent. Broader market indices Nifty Midcap 100 and Nifty Smallcap 100 declined 11 per cent and 13 per cent, respectively.

 

MF executives and experts say that the fact equity MF inflows remained positive for the 48th consecutive month in February despite the sharp fall in equities is a positive for the industry. However, data for the coming months will be more keenly watched by industry players, as MF flows remain key to overall market stability.

 

“The continued market correction has led to a slowdown in sales. This could also be partially attributed to a truncated month. Investors are being cautious in allocations and may postpone or stagger investments soon. Having said that, net sales of nearly Rs 30,000 crore are still healthy, and the broader sentiment looks optimistic from a long-term wealth creation perspective,” said Akhil Chaturvedi, executive director and chief business officer, Motilal Oswal Asset Management Company.

 

“Allocations are tilting towards multi-asset allocation, largecap, and flexicap funds,” he added.

 

At the category level, midcap and smallcap funds witnessed the sharpest dip in inflows. Midcap and smallcap funds raked in Rs 3,406 crore and Rs 3,722 crore in February, compared to Rs 5,147 crore and Rs 5,720 crore, respectively, in January.

 

Flexicap funds, a comparatively lower-risk equity MF offering, garnered over Rs 5,000 crore for the second month in a row.

 

At a broader level, the decline in net inflows was largely due to a sharp dip in gross inflows from Rs 66,630 crore in January to Rs 54,429 crore in February. Outflows declined 7 per cent M-o-M to Rs 26,942 crore.

 

Debt MFs recorded an outflow of Rs 6,525 crore in February, following an inflow of Rs 1.28 trillion in the previous month.

 

Overall, the industry recorded a net inflow of over Rs 40,000 crore.

 

“The MF industry continues to demonstrate resilience, with consistent investor participation across categories. Despite market fluctuations, net inflows stood at Rs 40,063 crore, reflecting investor confidence in long-term wealth creation,” said Venkat Chalasani, chief executive, Amfi.

 

At the end of February, MF industry assets under management (AUM) stood at Rs 64.5 trillion, down from the peak AUM of nearly Rs 68 trillion at the end of November.