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Inflows into equity mutual funds surged to Rs 10,730 crore in February, the highest level in 11 months, even as the broader market witnessed heavy volatility amid concerns over the impact of coronavirus.

Overall, mutual fund industry witnessed a net outflow of Rs 1,985 crore across all segments, mainly owing to withdrawal from liquid or money market category. This comes following an inflow of Rs 1.2 lakh crore in January.

According to data released by Association of Mutual Funds in India on Wednesday, net inflows into equity and equity-linked schemes rose from Rs 7,547 crore in January to Rs 10,730 crore in February.

This is the highest investment since March 2019, when equity schemes attracted an inflow to the tune of Rs 11,756 crore.

As the spread of coronavirus epidemic scared global equities, Indian stock market too found itself in its grip and registered a fall of almost 6.5 per cent (for S&P BSE 100) in February 2020.

"However, showing maturity, Indian investors viewed this fall as an opportunity to buy into equities and invested in equity funds," said Himanshu Srivastava, Senior Analyst - Manager Research at Morningstar India.

The inflow is well spread between the category of funds such as large-cap, mid-cap, small-cap and multi-cap, among others.

Multi-cap, large-cap, mid-cap and small-cap funds saw inflows of Rs 1,625 crore, Rs 1,607 crore, Rs 1,451 crore and Rs 1,498 crore, respectively.

Investors continued to focus on multi-cap category as it provides them exposure in all the three segments of the equity markets (large, mid and small caps). The aim is to benefit from the opportunities arising in all three market segments by staying invested in one fund, Srivastava added.

The staggering investment in equity schemes could be attributed to steady flow of Rs 8,513 crore through systematic investment plan (SIP) route.

"Individual investors continue to repose trust in the equity market, investing through mutual funds via the SIP route and am happy to note that SIP monthly contributions have breached the Rs 8,000 crore mark for the 15th consecutive month," said N S Venkatesh, Chief Executive, AMFI.

Further, he said equity linked saving schemes continued to find favour with individual investors, with positive net flows at Rs 871 crore during the month under review, despite the Budget for 2020-21 proposing alternate simplified tax structure.

Going ahead, Venkatesh expects continued buoyancy in SIP flows in March too, though a few institutional investors may re-assess their investment strategy, given the deep correction in markets.

Apart from equities, Gold ETFs too received a net inflow of Rs 1,483 crore in February, sharply higher than net inflow of Rs 202 crore in the previous month. Interestingly, investments into gold ETFs have been rising for the fourth straight month With global economy staring at a major slowdown as coronavirus epidemic tightening its grip across the globe, Gold ETF emerged as the go to asset class as it regained its safe haven appeal.

Overall, the industry, which witnessed a net outflow of Rs 1,985 crore across all segments, saw a pull out of Rs 43,825 crore from liquids funds and Rs 1,474 crore from overnight funds.

The outflow has pulled down the assets under management of the industry to Rs 27.23 lakh crore in February-end from Rs 27.86 lakh crore in January-end.

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Free Press Journal