Finding their sea legs: BAFs, the calm in the eye of market storm

Tidal shift: Anchoring strong in choppy seas, BAFs draw Rs 2,456 crore amid equity ebb

Inflows into balanced advantage funds (BAFs) soared to a 33-month high of Rs 2,456 crore in October, driven by a sharp selloff in equity markets. This marks the highest net collection since January 2022.

 

BAFs, a hybrid mutual fund category, invest in both equity and debt assets, with allocation primarily guided by equity valuations. This strategy makes BAF less sensitive to equity market volatility while offering higher return potential compared to purely debt-based instruments.

 

Investment experts recommend BAFs for risk-averse investors, particularly during periods of market turbulence. They are also favoured for one-time investments in volatile market phases. 

   

The October inflows coincided with a downturn in equity markets. The benchmark National Stock Exchange Nifty 50 dropped more than 6 per cent during the month, slipping into the ‘correction’ zone after a cumulative fall of over 10 per cent from its peak.

 

After subdued inflows since July 2022, BAF investments regained momentum in January 2024. Year-to-date, BAFs have attracted Rs 13,905 crore, a big jump from Rs 4,574 crore recorded for the entire calendar year of 2023, according to data from the Association of Mutual Funds in India.

 

The last sizeable surge in BAF inflows occurred in the latter half of 2021, a period marked by record-high equity markets. At that time, these funds had emerged as a popular choice for investors seeking safer bets amid heightened market volatility.