Equity funds log inflow of Rs 12,500 cr in Jan, small-caps top share

Net inflows into active equity mutual funds (MFs) surged to Rs 12,546 crore in January, rising 70 per cent month-on-month (MoM), according to data released by the Association of Mutual Funds in India (Amfi) on Thursday.

Higher inflows into equity categories were on the back of rising inflows through systematic investment plans (SIPs) which remained above Rs 13,000 crore for the fourth consecutive month.

Inflows from SIPs touched a record high in January at Rs 13,856 crore, up from Rs 13,570 crore in December. More than 2.26 million new SIP accounts were added during the month, while 1.35 million accounts matured/discontinued.

Amongst all the sub-categories of equity funds, small-caps had the largest share of inflows at Rs 2,256 crore. Small-caps were followed by large- and mid-caps, and multi-cap funds.

“Investors are seeing value in small-caps in the beaten-down market. Since these are investments for the long term, investors believe they will stand to gain once the correction sees reversal,” said N S Venkatesh, chief executive officer, Amfi.

The inflows were regardless of markets dropping for the second straight month in January. The benchmark Nifty fell 2.5 per cent last month and 3.5 per cent in December.

The fall in the market, however, impacted index funds and exchange-traded funds. Inflows into index funds dipped for the third consecutive month amidst correction in the broader market. In January, the inflow was at Rs 5,813 crore, down by 13.7 per cent MoM.

Inflows from SIPs have continued to counterbalance the outflows from foreign institutional investors.

“After three months of decreasing net flows, equity category flows were higher than the Rs 10,000-crore mark. Notwithstanding volatility in stock markets, investors continue to repose faith in equity MFs,” said Gopal Kavalireddi, head-research, FYERS.

Experts said the continuity in monthly inflows, even in a fickle market, is a reflection of efforts towards financial discipline by the industry and MF distributors.

“Strong flows despite a volatile month with markets being subdued are a sign of increasing maturity of investors to continue their allocations in equity MFs,” said Akhil Chaturvedi, chief business officer, Motilal Oswal Asset Management Company.

Although investments in equity-oriented funds have recovered after touching a 21-month low two months ago, redemptions from the debt category have sustained.

In January, the net outflow from debt MFs was at Rs 10,316 crore. This is the second consecutive month of heavy outflows from income- and debt-oriented schemes. With uninterrupted monetary policy rate hikes, investors have redeemed funds from liquid, long-duration funds, and corporate bond funds.

“Once the rate hike peaks, we will see more money coming into long-duration funds. We believe that one more rate hike is possible. We will see money coming into duration funds from the quarter beginning April,” said Venkatesh.

“With the interest rate hike cycle still in progress, hybrid funds continue to find support, with a net flow of Rs 4,491 crore in January, doubling down on flows of last month,” added Kavalireddi.

The assets under management (AUM) for the MF industry were little changed at Rs 39.62 trillion at the end of January. Equity AUM stood at Rs 15.1 trillion crore and debt AUM at Rs 12.37 trillion.