The net equity mutual fund inflow for February slumped by 26 percent over a month ago to Rs 29,303.34 crore, data released by the Association of Mutual Funds of India (AMFI) on March 12 showed.
The net inflow into open-ended equity funds fell, but managed to stay in the positive for the 48th month in a row. The fall in inflows has come at a time of deep market correction, as February saw benchmark BSE Sensex slump 5.55 percent while Nifty 50 fell by 5.89 percent, roiled by global uncertainties, weak earnings and a sluggish economy.
Further, monthly systematic investment plan (SIP) inflows into mutual funds fell to a three-month low of Rs 25,999 crore in February as market selloff intensified.
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On the February monthly data, Venkat Chalasani, Chief Executive, AMFI, said, “The Indian mutual fund industry continues to demonstrate resilience, with consistent investor participation across categories. Despite market fluctuations, net inflows stood at Rs 40,063 crore, reflecting investor confidence in long-term wealth creation. SIP contributions remained steady, highlighting the continued preference for systematic investments."
Equity funds
Equity mutual fund inflows had marginally fallen by 3.6 percent in January over the previous month to Rs 39,687.78 crore.
Mutual fund investors took a cautious stance during the month as inflows into high-risk smaller-cap funds took a hit.
Data shows that net investments into the smallcap fund category fell 34.9 percent to Rs 3,722.46 crore, while inflows into the midcap fund segment crashed 33.8 percent to Rs 3,406.95 crore during February.
On the other hand, inflows into large-cap funds dipped just 6.4 percent to Rs 2,866 crore.
Notably, all the equity fund categories apart from the focused fund category saw a dip in inflows during the last month.
Focused funds saw 64.4 percent jump in investments to Rs 1,287.72 crore.
Net inflows into Sectoral/Thematic Funds fell further to Rs 5,712 crore in February on a fall in money mopped up by new fund offers. Last month, seven new Sectoral/Thematic Funds garnered Rs 2,072 crore during the NFO period.
"Several factors contributed to the decline in investor sentiment for instance escalation in the global trade war, geopolitical tensions, slower domestic earnings growth, profit booking at high valuations, and continued FII outflows didn’t augur well for the markets.," said Nehal Meshram, Senior Analyst – Manager Research, Morningstar Investment Research India.
"While short-term headwinds have tempered investment flows, domestic investor confidence remains strong, as indicated by continued inflows," Meshram added.
Debt funds
On the fixed-income side, debt mutual funds saw net outflow of Rs 6,525.56 crore in February, as against net inflow of Rs 1.28 lakh crore in January.
Ultra Short Duration Fund category saw outflows of Rs 4,281.02 crore, while Money Market Funds saw net selling of Rs 3,275.97 crore. On the other hand Liquid Fund saw net inflows of Rs 4,976.97 crore, while Corporate Bond Fund saw net buying of Rs 1,064.84 crore.
"Investors may be positioning themselves for interest rate cuts by the RBI in the coming months, which could lead to capital appreciation in long-duration bonds. Additionally, gilt funds remain attractive due to their low credit risk and sovereign backing, making them a preferred choice during periods of economic uncertainty," said Meshram.
Due to the mark-to-market losses in the equity segment, overall assets under management (AUM) of the Indian mutual fund industry fell 4.04 percent during February to Rs 64.53 lakh crore against Rs 67.25 lakh crore in the previous month.
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