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Mumbai: Sustained investments by retail investors through systematic investment plans and possible opportunistic investments due to relatively cheaper valuations of stocks drove inflows into equity-oriented funds to a 11-month high of 107.96 bln rupees in February.

However, assets under management of equity-oriented schemes fell by 4.13% on-month to 7.57 trln rupees as on Feb 29 due to the crash in the benchmark indices, data released by the Association of Mutual Funds in India showed.

Overall, the mutual fund industry saw net outflows of 19.86 bln rupees in February, as compared to net inflows of 1.20 trln rupees in the previous month. This led the industry's assets under management fall 2.3% on-month to 27.23 trln rupees as at the end of February.

"Despite the market volatility arising out of trade wars, coronavirus, I would say that the mutual fund industry has shown a bit of resilience and continued to grow on an upward trend. The SIP numbers are also held steady, which indicate that retail investors have reposted trust in the mutual fund industry, and they believe that their investment is for the long term," AMFI CEO N.S. Venkatesh said.

In February, the benchmark indices Nifty 50 and S&P BSE Sensex have fallen by 4% each due to the concern over the coronavirus epidemic and its impact on the economic growth.

Among equity-oriented schemes, thematic funds saw the highest inflows in February at 19 bln rupees, as against 38 mln rupees in January. This is due to the launch of Axis ESG Equity Fund which mobilised 17 bln rupees. However, the assets of thematic funds fell 2.6% on month to 639 bln rupees as at the end of February.

Owing to the uncertainty in the equity markets, investors remained invested in blue-chips stocks which led to a 39% rise in large-cap funds at 16 bln rupees in February. Net inflows into mid-cap funds fell 19% on month to 14.5 bln rupees, while that of small-cap funds rose 40% on-month to 15 bln rupees, mainly due to the launch of two small-cap funds by IDFC Mutual Fund and ITI Mutual Fund which garnered nearly 7 bln rupees.

Barring value-fund category and dividend yield funds in the equity-oriented schemes, all other categories witnessed inflows during February.

Inflows through systematic investment plans dipped marginally to 85.13 bln rupees during the month, from 85.32 bln rupees in the previous month. Assets under management of systematic investment plans stood at 3.11 trln rupees as on Feb 29, coming from 30.95 mln folios.

"We expect continued buoyancy in SIP flows in March too, though a few institutional investors may reassess their investment strategy, given the deep correction in markets," said Venkatesh.

Overall folios, or the number of investor accounts increased to 88.84 mln as at the end of February from 88.5 mln in January.

Hybrid funds saw net outflows of 20 bln rupees in February, as against 12.6 bln rupees of net inflows in the previous month. The net outflows into the category were led by balanced hybrid funds at 11.82 bln rupees followed by equity savings fund at 5.53 bln rupees in February.

Net inflows into gold exchange-traded fund jumped seven-fold in February to 14.83 bln rupees, due to the demand for safe-haven assets owing to the market uncertainty surrounding the impact of coronavirus outbreak. The assets under management of gold exchange-traded fund rose over 28% on month to 79.26 bln rupees as at the end of February.

DEBT FUNDS

Open-ended debt-oriented schemes saw a net outflow of 279.4 bln rupees during the month, as compared to a net inflow of 1.09 trln rupees in January. The outflows in February were largely led by huge outflows in liquid and overnight funds. As a result, asset under management of open-ended debt-oriented schemes fell 1.6% on-month to 12.22 trln rupees as on Feb 29.

In February, liquid funds saw net outflows of 438.25 bln rupees, as against net inflows of 596.83 bln rupees in January, while overnight funds saw net outflows of 14.74 bln rupees, compared with 226.52-bln-rupee net inflows in the previous month.

Swarup Mohanty, chief executive officer of Mirae Asset Mutual Fund pointed out that the outflows from the liquid fund is largely due to the year-end fund requirements of institutional investors, and also due to credit concerns prevailing in the market.

Companies usually park their money in liquid schemes to meet their short-term fund requirements, instead of leaving cash idle, resulting in sharp inflows and outflows in the category, on a cyclical basis.

Due to this, assets of liquid and overnight funds de-grew 8.65% and 2.37% on-month to 4.43 trln rupees and 532.83 bln rupees, respectively, as on Feb 29.

Among other categories in the open-ended debt-oriented schemes, inflows into low duration funds were at 31.52 bln rupees, while into money market funds were at 25.53 bln rupees.

Net inflows into short-duration funds stood at 40.76 bln rupees, and into banking and PSU debt funds and corporate bond funds were 32.05 bln rupees and 28.41 bln rupees, respectively.

Credit risk funds continued to see net outflows for the 11th straight month at 6.37 bln rupees, as liquidity crunch in the non-banking sector space and its impact on credit quality of individual entities led investors to steadily cut their exposure to credit funds over the last few months.

However, asset under management of credit risk funds were up marginally by 0.4% on month to 618.38 bln rupees as on Feb 29.

Among closed-ended schemes, outflows were large for fixed-term plans as several schemes matured. Net outflows in the category were at 1.32 bln rupees in February, lower than 3.4 bln rupees in January.

There were few new launches owing to ongoing credit quality issues, and loss of investor appetite for the category. The industry mobilised 1.42 bln rupees from two closed-ended schemes launched by SBI Mutual Fund during the month.

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