The domestic mutual fund industry’s assets under management (AUM) declined 0.89% to Rs 23.16 lakh crore in February 2019. This was led by outflows from income and liquid funds. However, equity funds held up thanks to ever-increasing systematic investment plan (SIP) flows.
Marking the 35th consecutive month of inflows into the category, equity oriented funds witnessed inflows of Rs 4,640 crore in February, but this has been on a declining trend. The previous two months reported inflows of Rs 5,082 crore and Rs 4,442 crore, respectively – a far cry from over Rs 10,000 crore of average monthly inflows in the previous 32 months. Equity oriented funds include equity schemes, arbitrage schemes, and ELSS schemes (tax-saving).
Fortunately, SIP flows hit a new record of Rs 8,094 crore in February, higher than the Rs 8,063 crore in January. SIP investors put in average of Rs 3,300 per account, which automatically invests money in funds. A significant portion of SIP investment is in equity funds.
Weak inflows coupled with mark-to-market (MTM) losses led to the category’s AUM declining by Rs 965 crore, or 0.12%, to Rs 8.29 lakh crore. Nifty 50 and Nifty 500, representing the underlying equity assets, lost 0.4% and 0.5%, respectively, in February.
Waning interest in equity funds can be seen in balanced funds. The category witnessed outflows for the second straight month, to the tune of Rs 1,077 crore in February against January’s outflows of Rs 952 crore. Net outflows and MTM losses led to erosion of the category’s asset base by Rs 2,825 crore, or 1.61%, to Rs 1.73 lakh crore.
Debt funds recorded sharpest outflows since November 2018. Investors in debt funds seem to be unnerved by the debt downgrade and credit liquidity crisis that ailed the mutual fund industry in the latter half of 2018. Outflows continued in February. Debt funds (excluding liquid and gilt funds) witnessed outflows worth Rs 4,214 crore, the sharpest monthly outflows seen since November 2018 which had recorded outflows amounting to Rs 6,518 crore.
|Month-on-month mutual fund flow and AUM distribution|
|Net inflow/ outflow (Rs Crore)|
|Mutual fund category||Feb 2019||Jan 2019|
|Debt funds #||-4214||2080|
|Equity funds *||4640||5082|
|Liquid/money market funds||-24509||58637|
|FoF investing overseas||-6||15|
|# represents income funds as stated by the AMFI|
|* includes ELSS and arbitrage funds|
NS Venkatesh, CEO, AMFI said: “Amid global uncertainty, tension at the border, liquidity tightness and credit events, retail investor behaviour to stay invested is quite heartening. The continued healthy confidence that retail investors are showing, as is reflected in rising number of SIP inflows is laudable. The patience to stay invested amid uncertainty, will help from the individual long term wealth creation perspective. Once political uncertainty and liquidity tightness recedes over the next few months, we expect the inflows in both equity and liquid funds to strengthen further.”
Gilt funds witnessed strongest outflows since October 2018. Gilt funds witnessed outflows of Rs 149 crore in February, higher than the outflows of Rs 89 crore in January, marking the sharpest outflows recorded since October 2018. Liquid funds saw outflows totalling Rs 24,509 crore in February as against inflows of Rs 58,637 crore in January. Due to liquid funds, the entire MF industry saw outflows amounting to Rs 20,083 crore in February compared to net inflows of Rs 65,439 crore in January.