May equity MF inflows rise despite turmoil

Mumbai: Retail investors stepped up their investments in equity mutual funds in May undeterred by the uncertainty in the stock market. Equity schemes witnessed flows of ₹18,529 crore in May as against ₹15,890 crore the previous month. Debt schemes, however, witnessed outflows as the outlook for interest rates firmed up. This partly resulted in the industry’s total assets under management (AUM) declining to ₹37.37 lakh crore during May as against the previous month’s ₹38.89 lakh crore.

Flows through systematic investment plans (SIPs) – akin to recurring deposits of banks – rose to ₹12,286 crore in May as against ₹11,863 crore in April.

“Any sharp correction is being used as an entry point to make an allocation to equity mutual funds,” said G Pradeepkumar, CEO, Union Mutual Fund.

Flexicap funds saw the highest collection of ₹2,939 crore in May, followed by large-cap and large-and-mid-cap categories, which got inflows to the tune of ₹2,485 crore and ₹2,413 crore, respectively. Low-cost passive funds, which include both equity and debt funds, saw inflows of ₹5,723 crore.

Dynamic asset allocation funds, which invest in a mix of debt and equity based on market valuations, saw inflows of ₹2,248 crore. Aggressive hybrid funds, which allocate 65-75% of their portfolio to equities, saw inflows of ₹1,380 crore.

“The balanced hybrid fund and aggressive hybrid fund category net flows were up 97%, indicating that, with uncertainties on economic and rate cycle, investors don’t want to be caught on the wrong foot and are reallocating their investments based on their risk profile and opportunities available,” said Gopal Kavalireddi, research head at brokerage Fyers.

Debt-oriented funds witnessed a net outflow of ₹32,722 crore in May 2022, compared to the previous month’s net inflow of ₹54,756 crore. Money market funds saw outflows of ₹14,598 crore, followed by short-duration funds and ultra-short duration funds.

“The outflow is an outcome of the rising interest rate cycle, with investors redeeming their investments from money market and low to short-duration funds,” said Kavalireddi. “It remains to be seen if this money will trickle down into fixed deposits or will come back into equity funds.”

With no sovereign gold bonds (SGB) for the financial year 2022-23 in the offing, investors allocated money to gold schemes. Gold ETFs saw inflows of ₹203 crore as investors bought the yellow metal fearing escalation of tension between Russia and Ukraine, surge in crude prices and rising inflation.