Mutual funds see ₹2.39 Trillion net inflows in April 2024

13 May 2024 , 10:41 AM

RETURN OF THE DEBT FUNDS IN APRIL 2024

Like in previous cases, the month after the end of the quarter resulted in a phenomenal surge in inflows into debt funds. April 2024 was no different. After seeing massive outflows of ₹1.98 Trillion in March 2024, we saw a sharp rebound in April 2024 as debt funds saw net inflows of ₹1.90 Trillion. It was largely led by inflows int liquid funds, which crossed ₹1 Trillion the month. The overall net inflows into mutual funds in April 2024 stood at ₹2.39 Trillion of ₹1.90 Trillion came into debt funds with the balance coming into equity active, equity passive and hybrid funds.

Interestingly, the net inflows were robust across all categories of mutual funds in April 2024. In the last few months, we have seen the net flows into passive funds slowing. That is not surprising, as the markets scaling new highs means that the point of interest is gravitating towards active equity funds. The SIP flows in April 2024 finally crossed the 20K mark, with net inflows of ₹20,371 Crore into SIPs in the month. NFOs were relatively tepid in the month, so most of the flow traction for equity funds came from SIPs. As of the close of April 2024, net MF AUM stood at a record level of ₹57.26 Trillion; 7.23% lower on MOM basis.

NON-DEBT FUND FLOWS ROBUST, BUT DEBT FUND STEAL THE SHOW

Debt funds clearly dominated the mutual fund flows in April 2024, accounting for ₹1.90 Trillion, out of the ₹2.39 Trillion of net inflows that the mutual funds segment witnessed overall. Inflows into Inflows into debt funds were dominated by liquid funds which accounted for more than half of the net inflows into debt funds. However, other fund categories at the short end of the curve like overnight funds, ultra-short duration funds, low duration funds, and money market funds also saw good traction. Among other categories of debt funds, gilt funds saw rising interest among debt fund investors.

What about non-debt flows. Equity fund inflows were lower MOM at ₹18,917 Crore, while hybrid funds did better than equity funds at ₹19,863 Crore. Inflows into passive index fund and index ETFs were relatively modest. In the absence of NFO support, the equity fund inflows were dominated by sector and thematic funds even as small cap funds made a comeback after a gap of couple of months. SIP flows managed to cross the barrier finally, clocking ₹20,371 Crore in gross SIP flows in the month of April 2024, largely equity flows.

WHO DOMINATES THE ₹1 TRILLION CLUB

We now turn to our monthly update on the Trillion Rupee Club. The Trillion rupee club is a group of fund categories with over ₹100,000 Crore (or ₹1 Trillion) in AUM. Out of the 39 categories of open-ended funds, there are 19 open ended fund categories with AUM of over ₹1 Trillion; the same as last month. Out of the 16 active debt schemes, 4 categories are in the Trillion rupee club; with 2 more expected to graduate shortly. This includes liquid funds, money market funds, and corporate bond funds, and short duration funds. While corporate bond funds remain the only long term fund, liquid funds saw a surge in AUM in April.

What about active equity funds? A total of 10 out of the 11 equity funds had AUMs in excess of ₹1 Trillion with only dividend yield funds having an AUM of under ₹1 Trillion. Out of these 10 funds, 4 categories of equity funds (large cap funds, sectoral funds, mid-cap funds, and flexi-cap funds are already having AUM of above ₹3 Trillion. Large & Mid-Cap funds, small cap funds and ELSS Funds have an AUM of between ₹2 Trillion and ₹3 Trillion; while multi-cap funds, value funds and focused funds have AUM between ₹1 Trillion and ₹2 Trillion. Active equity funds accounted for bulk of AUM accretion in April 2024 also

What about the hybrid and passive funds? Out of the 8 funds in the hybrids / solutions category, there are 3 funds in the ₹1 Trillion club with Aggressive Hybrid Funds and Dynamic Asset Allocation Funds (BAFs) already in the ₹2 Trillion club. In the passive funds category; index funds and index ETFs are already in that category. If you look at all fund categories, across equity, debt, hybrids, and passives; it is the index ETF category, that has the highest AUM at ₹6.82 Trillion, followed by liquid funds at ₹4.69 Trillion and flexi cap funds at ₹3.64 Trillion; among the leading categories overall.

DEBT FUNDS SEE OUTFLOWS OF ₹1.90 TRILLION IN APR-24

Here is a quick look at how the monthly flows across fund categories panned out for the last 13 months. Solutions funds are merged into hybrid funds.

Month	Debt Fund Flows (₹ Crore)	Equity Fund Flows (₹ Crore)	Hybrid Fund Flows (₹ Crore)	Passive Fund Flows (₹ Crore)	Total MF Flows (₹ Crore)
Apr-23	106,677	6,480	3,511	6,945	121,435
May-23	45,959	3,240	6,193	4,487	57,420
Jun-23	(14,136)	8,638	4,611	2,057	(2,022)
Jul-23	61,440	7,626	12,541	860	82,046
Aug-23	(25,873)	20,245	17,273	4,535	16,181
Sep-23	(1,01,512)	14,091	18,650	4,720	(66,192)
Oct-23	42,634	19,957	10,250	7,746	80,529
Nov-23	(4,707)	15,536	13,723	2,234	25,616
Dec-23	(75,560)	16,997	15,229	573	(40,685)
Jan-24	76,469	21,781	20,885	3,983	1,23,205
Feb-24	63,809	26,866	18,288	9,756	1,18,351
Mar-24	(1,98,299)	22,633	5,791	12,793	(1,59,387)
Apr-24	1,89,891	18,917	20,110	11,505	2,39,233

Data Source: AMFI

Here are some quick takeaways. Debt funds continue to follow the cycle of sharp inflows immediately after the end of a quarter. However, the bulk of the debt fund inflows are still going towards debt funds at the short end of the yield curve. Equity fund inflows have been gradually waning over the last 3 months, but that could be attributed to the SEBI stricture on mid-cap and small cap funds. In the last one year, the big story has been the rapid emergence of hybrid funds as a smart asset allocation option.

HOW OVERALL AUM MIX EVOLVED IN APRIL 2024?

The month of March 2024 had seen a sharp fall in net AUM to ₹53.40 Trillion. However, that has changed drastically in April as the overall AUM surged by 7.23% MOM to ₹57.26 Trillion. If you compare the overall mutual fund AUM on a yoy basis i.e. April 2024 over April 2023, then the mutual fund AUM is sharply up by 37.58%. In April 2024, the surge in debt fund flows and the equity appreciation played a positive part in overall AUM accretion.

Month	Debt AUM (₹ Trillion)	Equity AUM (₹ Trillion)	Alternate AUM (₹ Trillion)	Total AUM (₹ Trillion)
Apr-23	12.99	15.85	12.47	41.62
May-23	13.49	16.57	12.85	43.20
Jun-23	13.48	17.43	13.22	44.39
Jul-23	14.17	18.25	13.69	46.38
Aug-23	14.00	18.60	13.74	46.64
Sep-23	13.05	19.08	14.17	46.58
Oct-23	13.54	18.79	14.10	46.72
Nov-23	13.58	20.33	14.87	49.05
Dec-23	12.91	21.79	15.78	50.78
Jan-24	13.77	22.50	16.17	52.74
Feb-24	14.50	23.12	16.62	54.54
Mar-24	12.62	23.49	17.02	53.40
Apr-24	14.59	24.74	17.66	57.26

Data Source AMFI

For April 2024, debt fund AUM surged to ₹14.59 Trillion compared to ₹12.62 Trillion at the close of March. This is the highest level of debt fund AUM in the last one year. Debt fund AUM is up 15.61% over March 2024. For April 2024, equity fund AUM edged up to ₹24.74 Trillion compared to ₹23.49 Trillion at the close of March; a yoy growth in AUM of 56.09%. That is not surprising with the Nifty and Sensex at lifetime highs. Alternate assets saw AUM grow by 41.62% yoy; across hybrid and passive AUM. Here are the AUM shares.

Month	Active Debt Funds	Active Equity Funds	Hybrid Funds	Passive Funds	Solution Funds	Close-ended Funds
Jan-24	26.10%	42.67%	13.09%	16.75%	0.82%	0.56%
Feb-24	26.58%	42.40%	13.02%	16.65%	0.80%	0.54%
Mar-24	23.64%	43.99%	13.53%	17.50%	0.83%	0.51%
Apr-24	25.48%	43.21%	13.23%	16.81%	0.80%	0.46%

If you take a 3-month perspective (April 2024 over January 2024), share of active equity fund AUM is up 54 bps, share of hybrid funds are up 14 bps while the share of passive funds is up 6 bps. This has been offset by active debt fund market share contracting by 62 bps over January 2024 and close-ended funds contracting by 10 bps. However, on a MOM basis, debt funds saw the best accretion in AUM of 184 bps, while all other categories saw a fall.

ACTIVE DEBT FUNDS: ROUTINE BOUNCE AFTER THE QUARTER

Debt funds saw record net inflows of ₹1,89,891 Crore in April 2024, reversing the pessimism of March 2024. There were only 3 categories of debt funds that saw net outflows in April 2024 viz; medium duration funds, banking & PSU funds, and credit risk funds. However, outflows from these categories were too small to make any substantive difference to the overall picture. The focus was largely on inflows into debt funds in April 2024.

Among the debt fund categories that saw massive inflows in April 2024 were Liquid Funds at ₹1,02,752 Crore, money market funds at ₹34,084 Crore, overnight funds at ₹21,195 Crore, ultra short duration funds at ₹11,105 Crore, low duration funds at ₹7,756 Crore, banking & PSU funds at ₹5,210 Crore, and corporate bond funds at ₹2,992 Crore. Other categories of debt funds that saw net inflows in April 2024, were relatively smaller in size.

ACTIVE EQUITY FUNDS: APRIL INFLOWS FALTER FOR SECOND MONTH IN A ROW

For the month of March 2024, all categories of equity funds, other than focused funds and ELSS Funds, saw net inflows. Total inflows into equity funds at ₹18,917 Crore in April 2024 has been lower for second month in a row. Sectoral / Thematic funds dominated inflows at ₹5,166 Crore; largely led by alpha hunting. The other fund categories that saw net inflows in April 2024 include; flexi cap/ multi-cap funds ₹4,897 Crore, large & mid-cap funds ₹2,639 Crore, small cap funds ₹2,209 Crore, value / contra funds ₹1,987 Crore, and mid-cap funds ₹1,793 Crore. It looks like after a brief lull in March 2024, small cap funds are back with a bang in April 2024.

HYBRID FLOWS BOUNCE; PASSIVE FLOWS SUBDUED

The combination of hybrid funds and solution funds got net inflows of ₹20,110 Crore, nearly 4-times the inflows in March 2024. In the hybrid category, net inflows into arbitrage funds dominated at ₹13,901 Crore as it is emerging as an alternative to liquid funds. Among others; multi-asset allocation funds saw net inflows of ₹3,313 Crore, dynamic asset allocation funds (BAFs) at ₹1,345 Crore, and equity savings funds saw net inflows of ₹1,295 Crore. Multi asset allocation funds, BAFs and equity savings funds appear to be more of a bet on the asset allocation theme to mutual fund investing; and in a complex interplay of asset classes, this idea seems to be a lot more appealing.

Passive funds had a relatively tepid month in April 2024 with net inflows at ₹11,505 Crore; lower than last month. This was driven by inflows of ₹6,524 Crore into index funds, and ₹5,747 Crore into index ETFs. Flows into gold funds and international fund of funds (FOFs) were negative, although it was more due to regulatory reasons. Passive flows had slowed in recent months due to easy alpha pickings. You cannot blame investors for alpha hunting!

OUR READING FROM APRIL 2024 AMFI MF FLOWS REPORT

Broadly, there are 3 insights we gathered from the mutual fund flows data for April 2024. Firstly, the debt funds continue to be in search of a narrative to appeal to retail investors, as treasury cycles continue to drive flows. Secondly, on equity funds, there has been a slowdown in flows overall in the last 2 months and that could be attributed to the caution on mid-cap and small cap funds. Finally, the big story is the preference shown by mutual fund investors for the asset allocation funds withing the hybrid category. That is not surprising since asset allocation drives nearly 80% of the portfolio swings.

The big challenge for mutual funds is to look at the bigger picture of how to expand the base. After all, with 120 Crore mobile connections, 70 Crore bank accounts and just around 4 Crore unique mutual fund investors, there is still yawning gap. That is another debate