MTM equity gains and robust debt fund inflows aid recovery

The asset base of India’s mutual funds (MF) industry swelled by over 6% on-month in July to Rs 27.12 lakh crore, marking the fourth straight month of gains. Overall assets under management (AUM) were last seen over the Rs 27 lakh crore level in February, before falling precipitously in March when the market witnessed a correction due to Covid-19 pandemic and ensuing lockdown. Mark-to-market (MTM) gains in equities and firm inflows in debt funds contributed to the July increase. Continued strong interest in gold and equity exchange traded funds (ETFs) also played a role.

Open-ended equity funds see first net outflow since April 2019

Redemptions across most categories led to open-ended equity schemes recording their first cumulative net outflow since April 2019, when the Association of Mutual Funds in India (AMFI) began disseminating data in the current format. Net flows in the category have been on a downward spiral since April and barely positive at ~Rs 240 crore in June. In July, the trend continued, leading to net outflows of Rs 2,480 crore. On the positive side, flows through systematic investments plans (SIPs) have sustained around the Rs 8,000 crore mark till June (numbers for July are yet to be released).

Specifically, multi-cap funds bore the brunt of outflows in July, amounting to ~Rs 1,033 crore while mid-cap funds saw investors pull out monies to the tune of Rs 579 crore. Incidentally, these are the highest net monthly outflows that both categories have seen since April 2019. Value/contra funds witnessed net outflows totalling Rs 549 crore, while for the large and midcap category, the corresponding outflow figure was ~Rs 467 crore.

Equity linked savings scheme (ELSS) and focused schemes were the only open-ended equity categories that managed to attract some inflows. ELSS found favour with investors as the deadline for tax saving investments for the previous fiscal drew closer end-July. Together, the categories saw net inflows of Rs 814 crore.

Despite the net outflows, MTM gains in the underlying market helped the open-ended equity category’s asset base to rise ~Rs 36,592 crore in July to Rs 7.38 lakh crore. India’s equity benchmarks, the Nifty 50 and S&P BSE Sensex rose 7.49% and 7.71%, respectively, on-month.