In Apr-21, the average AUM and the closing AUM touched record levels. The closing AUM touched Rs32.38 trillion while the average AUM at close of April scaled Rs32.42 trillion. The AUM mix on 30-Apr was Income Funds (43.74%), equity funds (30.25%), hybrid funds (11.73%), passive and solution oriented funds (10.74%). The residual 3.54% were close-ended funds, where AUM fell sharply in April due to Rs22,403cr redemptions in Fixed Term Plans. Overall AUM has grown 35.3% from Rs23.93 trillion to Rs32.38 trillion yoy.
Debt funds see inflows of over Rs1 trillion in Apr-21
After the massive outflows from debt funds in Mar-21, it was once again a month of healthy inflows in Apr-21. While March saw net outflows of Rs52,528cr from debt funds on the back of liquidity adjustments by corporate and institutional customers, it was compensated in April 2021 with debt fund inflows of Rs100,903cr.
Here is a quick look at the specific inflows. Liquid funds saw net inflows of Rs41,507cr while money market funds and overnight funds saw inflows of Rs20,287cr and Rs18,492cr respectively. Among other major categories of debt funds that saw inflows were Low Duration Funds Rs9,322cr and Ultra Short Duration Funds Rs8,919cr. It looks like traders are still betting on a possible rate hike as floater funds saw inflows of Rs3,352cr in Apr-21.
In a month when net inflows into debt funds were above Rs1 trillion, the categories with outflows are few and far between. Among the specific debt fund categories that witnessed outflows in Apr-21, Dynamic Bond funds saw outflows of Rs2,103cr while Corporate Bond Funds saw outflows of Rs1,880cr. Despite the fear of higher yields, gilt funds saw safe haven inflows. Banking & PSU funds did not see outflows like in March after SEBI clarified that it was putting off the provisioning for AT-1 bonds by one year.
Equity funds saw inflows for the second month in success in Apr-21
If you thought that the equity fund inflows were a flash in the pan in Mar-21, then it did an encore in Apr-21. Of course, equity fund net inflows were just Rs3,437cr in Apr-21 compared to Rs9,115cr in Mar-21. Between Jul-20 and Feb-21, total net outflows from equity funds were Rs46,790cr but, during the same period, SIPs infused Rs62,480cr into mutual funds. For Mar-21 and Apr-21, Indian mutual funds witnessed positive flows into equity funds and also robust SIP flows. We will come back to this point later.
Let us focus on the specific categories of equity funds that saw inflows. Sectoral funds and thematic funds continue to remain in focus as the best way to play the sector rotation. Sector funds saw inflows of Rs1,705cr while mid-cap funds saw inflows of Rs958cr and large & mid-cap funds Rs708cr. On outflows, it was only value and contra funds that saw outflows of Rs674 crore while the net outflows from flexi-cap funds and ELSS Funds were minor
Arbitrage funds lead the way as passive funds build heft
Hybrid funds actually improved on their overall March show with net inflows of Rs8,641cr in Apr-21. Within hybrid funds, the story was largely about arbitrage funds that saw net inflows of Rs7,245cr in the month of Apr-21. The other category of hybrid funds that saw significant inflows of Rs1,700cr was dynamic asset allocation funds. Arbitrage funds have emerged as a strong alternative to short-end liquid funds as the returns on these arbitrage funds have been improving with stock market volatility. Traders continue to be sceptical about aggressive hybrid funds, which again witnessed outflows.
If hybrid funds saw robust inflows, passive funds were not too far behind. Debt ETFs saw inflows of Rs2,537cr while index funds saw inflows of Rs1,168cr. Even gold ETFs saw inflows of Rs680cr despite the uncertainty around gold prices and global economic recovery. One thing is apparent that passive is certainly emerging as a distinct asset class in India.
Another steady month for SIPs in Apr-21
If systematic investment plans (SIPs) saw inflows at Rs9,182cr in Mar-21, then it was almost close with SIP inflows of Rs8,591cr in Apr-21. SIPs already account for 38% of the total equity fund AUM and that is a good signal for long term sustainability of equity funds as an asset class. It looks like the positive shift in equity fund flows in March was not a flash in the pan. The next few months could be critical in underlining this trend shift!