Equity fund inflows rise 23% to Rs 26,866 crore in Feb; SIP book tops Rs 19,000 crore

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Funds flow into open-ended equity funds jumped 23 percent to Rs 26,865.78 crore in February, according to the data released by the Association of Mutual Funds of India (AMFI), the industry trade body for mutual funds, on March 8.

Inflows to equity funds have remained in the positive zone for the 36th straight month since March 2021.

Notably, investments via systematic investment plans (SIPs) hit a fresh record high of Rs 19,186 crore last month against Rs 18,838 crore in January.

Speaking on monthly data, Venkat Chalasani, Chief Executive, AMFI said, “There is a surge in SIP accounts, totalling 8.20 crore with 49.79 lakh new SIP registrations. This underscores investors' unwavering commitment to disciplined wealth accumulation. The industry's net AUM has also reached Rs 54,54,214.13 crore in February."

Overall, net inflows into open-ended mutual fund schemes moderated from Rs 1.23 trillion in January to Rs 1.19 trillion in February.

Equity funds

Smallcap and midcap funds saw robust inflows in February even after Sebi raised concerns over froth in the segments.

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Inflows into midcap funds dipped 12 percent but remained healthy at Rs 1,808 crore, while net investments into smallcap funds dipped 10 percent but came in at Rs 2,922 crore last month.

Over February 27-28, the capital market regulator, the Securities and Exchange Board of India (SEBI) instructed mutual funds to dig deep in their small-cap and midcap funds’ portfolios to gauge how liquid they are and how volatile they are compared to their benchmarks, among many other such indicators.

“February net flows came in line with expectations with buoyant market conditions, strong SIP flows and large NFO listing. Accumulation of units at market dips is helping in enhancing overall portfolio returns,” said Manish Mehta, National Head - Sales, Marketing & Digital Business, Kotak Mahindra Asset Management Company.

Among the equity asset class, the Sectoral/Thematic Funds category saw the highest inflows to the tune of Rs 11,262.70 crore. The category was aided by the launch of five new schemes during the month (Groww Banking & Financial Services Fund; quant PSU Fund; SBI Energy Opportunities Fund; WhiteOak Capital Banking & Financial Services Fund; WhiteOak Capital Pharma and Healthcare Fund) which cumulatively garnered Rs 7,178 crore during their NFO period.

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"While gross purchases in the smallcap category continued to be robust over the month, the redemptions in the category were the third largest among the equity categories possibly due to investors opting to book profits on the back of a sharp uptick in the performance of this category," said Melvyn Santarita, Analyst, Morningstar Investment Research India.

Interestingly, the largecap category saw its third highest flows in 20 months with net inflows of Rs 921 crore in February 2024. While the net inflows were positive, it also saw the second-highest gross redemption among the equity categories in February 2024.

Debt funds

In the fixed income segment, debt funds saw net inflows of Rs 63,809 crore in February against Rs 76,469 crore net investments in January.

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Inflows in debt funds were positive largely thanks to Rs 83,642 crore investments into the short-term Liquid Fund category. This was followed by Rs 3,029 crore inflows into the Corporate Bond Category.

On the other hand, Low Duration Funds saw outflows of Rs 4,100 crore, followed by RS 3,610 crore outflows from Floater Funds in February.

"The Reserve Bank of India had maintained the status quo on its benchmark rate at 6.5 percent during its Monetary Policy Committee meeting in February and we expect it to maintain the status quo on rates for the next one or two quarters. This will lead to some softness in yields in the near term. However, the investors will remain a little cautious ahead of the election months and will also closely watch the global interest rates," said Ashwini Kumar, Head Market Data, ICRA Analytics.

Gold ETFs

The quantum of net flows in Gold ETFs saw a sharp uptick to Rs 997 crore in February, from Rs 657 crore in the previous month. This was the fourth highest net inflows during a month. The category was also aided by the launch of Zerodha Gold ETF which garnered Rs 35 crore during the month.

"With ongoing geopolitical tensions, the US inflation still higher than the desired number, the appeal of gold as safe haven and hedge against inflation is expected to continue. Gold prices in the US dollar terms scaled new highs after going past the $2,100 per ounce mark in early December 2023 and now again in early March 2024," said Santarita.