Investors stick to SIPs as selling pressure on equity mutual funds recedes

Outflows from equity mutual funds came down in December 2020, the monthly data released by the Association of Mutual Funds in India (AMFI) has shown.

Equity funds saw net redemptions worth Rs 10,147 crore in December 2020 compared to Rs 12,917 crore in November 2020. Hybrid schemes – mutual fund schemes investing in stocks, bonds and gold in varied proportions – saw net sales of Rs 5,932 crore compared to Rs 5,249 crore in the previous month.

Investors continue to believe in systematic investment plans (SIPs) as a preferred means of investing in mutual funds. During December 2020, the number of SIP accounts grew to 3.47 crore from 3.4 crore in November. Monthly SIP contribution in November increased to Rs 8,418 crore compared to Rs 7,302 crore in November, according to AMFI data.

Total assets under management for the mutual fund industry stood at Rs 31 lakh crore as on December 31, 2020, compared to Rs 30 lakh crore as on November 30, 2020.

All bond funds put together saw net investments of Rs 13,862 crore. Money Market funds and ultra-short-term bond funds saw net outflows of Rs 11,896 crore and Rs 5102 crore, respectively. This is largely attributed to the quarter-end phenomenon, wherein corporate and large investors opt to withdraw the short term money parked in mutual funds for payments of taxes and repayment of other short term liabilities.

Short duration funds, corporate bond funds, and banking and PSU bond funds saw net inflows of Rs 3,953 crore, Rs 8,609 crore and Rs 2,071 crore, respectively in December. Investors continue to prefer bond funds, investing in short term bonds and high-quality bonds.

Credit risk funds registered net redemptions of Rs 190 crore in December. Credit risk funds have seen redemptions since the beginning of the year, as investors decided to distance from credit risk, despite the high yield on offer.

Among equity funds, large cap funds and multi cap funds saw net outflows of Rs 3,540 crore and Rs 3,876 crore in December respectively. Dividend yield funds and sectoral/ thematic funds saw net investments of Rs 1,490 crore and 3,412 crore. The inflows are a result of money raised in new fund offers launched in December.

Gold ETF saw net inflows of Rs 430 crore after registering redemptions of Rs 141 crore in the previous month. Gold funds posted gains of 2.77 percent in December 2020.

Investors were rewarded for taking risks in CY2020. Large, mid and small cap equity funds delivered 15.19 percent, 25.78 percent and 32.05 percent, respectively in CY2020, as per data from Value Research.