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Retail investors bump up MF investments despite volatile market, dent in debt funds after rate hikes

Systematic investment plans (SIP) have emerged as a preferred mode of investment in equity funds. SIP contribution for May stood at Rs 12,286 crore compared to Rs 11, 863 crore in previous month

June 13, 2022 / 06:19 AM IST
Representative image.

Representative image.

Despite volatility, mutual fund equity schemes registered net inflows of Rs 18,529 crore in May, up from Rs 15,890 crore in April, data released by Association of Mutual Funds in India showed.

Overall assets under management for the mutual fund industry stood at Rs 37.22 trillion (lakh crore) as on May 31 compared to Rs 38.03 trillion a month ago.

Flexi-cap funds got the highest net inflows of Rs 2,938 crore. Large cap schemes and large & mid cap schemes received net flows of Rs 2,485 crore and 2,413 crore respectively. Net inflows are calculated by deducting total redemptions from total investments.

None of the equity scheme categories saw net outflows in May despite correction in the stock market. Bellwether index Nifty 50 lost 3.12 percent in the month whereas Nifty Midcap 150 and Nifty Smallcap 250 index lost 5.51 and 9.45 percent respectively. An unscheduled hike in repo rate in May added to market volatility.

Vijai Mantri, co-founder and chief investment strategist at JRL Money, said, “Sustained inflows in equity funds suggests that Indian investors are getting more matured and are buying at lower levels.”

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Systematic investment plans (SIP) have emerged as a preferred mode of investment in equity funds. SIP contribution for May stood at Rs 12,286 crore compared to Rs 11, 863 crore in previous month. Number of SIP accounts went up to 5.48 crore as on May 31 compared to 5.39 crore as on April 30.

All categories of hybrid schemes- mutual fund schemes investing in varying mix of stocks, bonds and gold - registered net inflows in May. Hybrid funds as a whole registered net inflows of Rs 5,123 crore which were lower than Rs 7,240 crore in previous month. Balanced advantage funds (BAFs) got the highest net inflows in hybrid funds worth Rs 2,247 crore. Investors keen to take advantage of volatility in the stock market tend to invest in BAF.

Experts point out that investing money when the markets turn weak tend to help investors when stocks bounce back. “This phase is good for accumulation and investors should invest at every fall. This is not the phase where returns will be visible but use this period to add equity,” said Mantri.

An unplanned 40 basis point hike in the repo rate in May to fight inflation led to a sell-off in debt funds. Debt funds put together saw net outflows of Rs 32,722 crore compared to net inflows of Rs 54,756 crore. Money market funds were the worst hit with net outflows of Rs 14,598 crore. Short duration funds and floater funds also saw net outflows of Rs 8,603 and Rs 5,285 crore respectively. The central bank further increased the repo rate by 50 basis points in June. This may lead to further outflows from debt schemes that have long term bonds.

Net inflows in gold exchange traded funds (ETF) went down to Rs 203 crore in May compared to Rs 1,100 crore in previous month. Moderate inflows in gold ETF despite weakness in gold prices underlined that some investors preferred to allocate to gold anticipating increased volatility going forward.

As the stocks are expected to remain volatile against the backdrop of rising interest rates, geo-political tensions and initial signs of resurgence of pandemic, investors are better off investing in equity funds in a staggered manner.
Moneycontrol PF Team
first published: Jun 9, 2022 01:48 pm
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