Net inflows into open-ended equity funds jumped 31 percent to Rs 20,534.21 crore, a one-year high, during March, even as Indian stock markets inched lower during the month, data released by the Association of Mutual Funds in India (AMFI) showed.
In the previous month, net equity inflows had stood at Rs 15,685.57 crore. Meanwhile, the hybrid net outflows in March came in at Rs 12,372 crore, as compared to inflows of Rs 460.30 crore in February.
Due to huge selling in debt and hybrid funds, open-ended mutual funds saw overall net outflows of Rs 21,693.91 crore during March.
During the month, investments via systematic investment plans (SIPs) topped the Rs 14,000 crore mark for the first time ever. The SIP contribution for March came in at Rs 14,276 crore compared with Rs 13,686 crore in February.
“SIP inflows continue to soar, breaking the record on a month-on-month basis – it would not be overkill to say that the retail investor is the hero of the markets. The spike in investors witnessed in the post-pandemic period, despite the volatility due to global geo-political reasons and inflation, is also a cue to resilient investor behaviour,” said N S Venkatesh, Chief Executive, AMFI.
Also see | The complete MC30 basket of mutual fund schemes
Shuffling the debt
In the debt category, investor focus shifted to long duration funds after the government introduced changes to the mutual fund taxation in the Finance bill.
According to the amendments to the Finance Bill, capital gains from investments in mutual funds, where not more than 35 percent is invested in domestic equities, will be taxed at a maximum marginal rate. This means that debt mutual funds no longer enjoy the benefits of long-term capital gains (LTCG) and indexation for fresh investments starting April 1.
Debt investments till March 31 enjoy the earlier favourable taxation regime.
Consequently, the highest net outflows in the income/debt-oriented category were seen in liquid funds, which saw net selling of Rs 56,924.13 crore in March.
Liquid funds are preferred by investors to park their money for short periods of time typically one day to three months.
In the debt category, the highest net inflows were seen in Corporate Bond Funds, which saw buying to the tune of Rs 15,626.16 crore.
“An outflow from liquid funds was expected because this is normal treasury management at the end of the financial year. Companies need to pay advance tax. Interest rates have peaked, so investors find it more attractive to invest in debt funds,” said Venkatesh.
Also read | Got Rs 10 lakh to invest? Tata MF’s fund manager picks 3 mutual funds to ride out volatile markets
Equity stays strong
In the Growth/Equity-Oriented funds, all the 11 categories saw positive inflows. In the category, Sectoral/Thematic Funds saw the highest net inflows at Rs 3,928.97 crore.
Dividend Yield Funds followed next with inflows of Rs 3,715.75 crore. However, most of these money came during the new fund offer period of SBI Dividend Yield Fund, which garnered Rs 3,496 crore.
Investors also continued to pose faith in small-cap stocks as the category saw net inflows of Rs 2,430.04 crore during the month. This was despite S&P BSE 250 SmallCap Index falling 10 percent since the start of the year.
There was also big buying in Mid Cap Fund and Large & Mid Cap Fund. While being the last month of the year, tax-saving Equity-linked Savings Schemes (ELSS) also saw net inflows of Rs 2,685.58 crore during March.
"Healthy inflows in equity categories highlight the resilience and confidence of retail investors in the Indian capital markets," said Anand Dalmia, Co-Founder and CBO of Fisdom.
Also read | Hunting for multibaggers? Here are the top microcap stocks that PMS love to hold
Deep dive
As per an AMFI presentation, the number of unique investors as gauged by PAN surged at 3.77 crore at the end of March 2023. This number was 3.37 crore at the end of last fiscal. Notably, the number of unique mutual fund investors has surged 214 percent from March 2017 till the end of last month.
The data also showed that women investors rose nearly 50 percent 74.49 lakh at the end of December 2022 against 46.99 lakh at the end of December 2019.
Further, the maximum number of women investors is in the age group of 45 years and above, while there are 2.82 lakh women investors in the age group of 18-24 years at the end of December 2022.
Also read | When should you sell your mutual funds?
Fiscal numbers
The FY23 was an eventful financial year for the Indian mutual fund industry, as it crossed the Rs 40 trillion milestone for the first time in November. Further, investments via monthly systematic investment plans (SIPs) topped Rs 13,000 crore for the first time in October.
It was also the year when passive funds came into the spotlight. Data from AMFI shows that for the financial year, Index funds garnered net inflows of Rs 95,670.62 crore during the financial year, which was highest among all the mutual fund categories.
They were followed by Other Exchange-Traded Funds with net inflows of nearly Rs 60,000 crore during April 2022 to March 2023. This category includes silver ETFs and overseas ETFs.
With most active mutual funds failing to beat the benchmarks, experts believe that flows into passive mutual funds is expected remain healthy.
When it comes to net outflows, Liquid Funds bled most at Rs -36,602.91 during April-March 2023, followed by Arbitrage Funds at Rs -35,171.34 crore.
In mutual funds, arbitrage is the simultaneous purchase and sale of a stock to take advantage of the price differential in spot and futures market.
Data also showed that most equity fund categories saw healthy net inflows during the year. Case in point, Sectoral/Thematic Funds saw net inflows to the tune of Rs 23,731.01 crore, while Small-Cap Funds saw similar net buying of Rs 22,103.70 crore.
Discover the latest Business News, Sensex, and Nifty updates. Obtain Personal Finance insights, tax queries, and expert opinions on Moneycontrol or download the Moneycontrol App to stay updated!
