The overall AUM surge in Sep-21 was muted although it did move from Rs36.59 trillion to Rs36.74 trillion, compared to Aug-21. The combination of positive flows into equity and hybrids was largely neutralized by outflows from debt funds, which is normal considering half-year end pressures. Here is a quick look at the AUM-cum-NFO chart as of Sep-21.
The AUM accretion in Sep-21 was just about Rs15,000cr as debt outflows neutralized the combined impact of equity price appreciation and inflows into equity and hybrid funds. The AUM composition as on 30-Sep was Income Funds (38.53%), equity funds (34.83%), hybrid funds (12.25%) and passive & solution funds (12.61%). The residual 1.78% were close-ended funds, where AUM fell sharply in Sep-21 due to Rs4,980cr redemptions from FTPs and Rs2,221cr from equity plans. Overall AUM grew 36.78% from Rs26.86 trillion to Rs36.74 trillion year-on-year. Equity and hybrid funds gained AUM share in Sep-21 at the cost of debt funds. The gap between the share of debt funds and equity funds in total AUM has reached its narrowest level ever. Needless to say, closed ended-funds have been consistently losing their charm for Indian investors.
Debt funds see heavy outflows in Sep-21 on half-year end flows
There were 2 debt fund trends visible in Sep-21. Firstly, there was heavy monetizing by treasury desks for half-yearly payments. Secondly, the shift to floaters continues on expectations of a spike in yields. The month of Sep-21 saw heavy outflows from debt funds to the tune of Rs63,910cr. First the category inflows! Overnight funds saw inflows of Rs16,312cr and floater funds Rs5,871cr in Sep-21. Medium and Medium to long duration funds saw combined inflows of Rs3,217cr.
There were a number of debt fund categories that saw sharp outflows in Sep-21. Among the specific debt fund categories, Liquid Fund saw outflows of Rs48,379cr, low duration funds Rs16,609cr and ultra-short duration funds Rs10,909cr. Among the other major instances of outflows in Sep-21, money market funds saw outflows of Rs8,433cr, Banking & PSU funds Rs4,404cr and Corporate Bond Funds Rs1,434cr.
Equity Fund inflows were stable in Sep-21 despite lower NFO support
Net inflows into equity funds were stable for Sep-21 at Rs8,677cr. However, net inflows may be still lower if you consider the Rs2,211cr outflows from close-ended equity funds. In terms of outflows, the only categories of equity funds that saw outflows were ELSS funds, value funds and small cap funds. More than 85% of equity fund inflows, in absolute terms, were from NFOs; principally Kotak Multi Cap, HSBC Mid Cap and Baroda Business Cycle.
Let us turn to the inflows into equity funds in Sep-21. The combination of multi-cap funds and flex-cap funds saw overall inflows of Rs5,578cr; largely supported by Kotak Multi-Cap NFO. Among other key categories, Sector Funds saw inflows of Rs2,618cr while Mid-Cap funds saw inflows of Rs1,351cr. In both cases, the driver was NFOs. Overall, equity funds saw cumulative net inflows of Rs68,551cr in the 6 months since Mar-21.
Hybrid funds were a mixed bag in Sep-21
Net flows into hybrid funds remained positive at Rs3,588 crore. However, there were two contrary trends. The allure of balanced advantage funds continued after the SBI NFO as this category saw inflows of Rs5,234cr in Sep-21. However, due to treasury considerations, the arbitrage funds saw outflows of Rs3,009cr. Among other hybrid categories, equity savings funds and conservative hybrids saw inflows while aggressive hybrids saw outflows.
The leader in inflows in Sep-21 was the passive category getting Rs11,620cr. Index funds saw inflows of Rs3,104cr while Debt ETFs saw inflows of a hefty Rs7,660cr. The other categories of gold ETFs and FOFs also attracted positive flows. The hybrid and passive funds put together account for 24.86% of overall AUM and are emerging as a distinct asset class.
SIPs finally cross the Rubicon
We have reiterated in the last few months that the next target would be monthly SIPs of Rs10,000cr. In Sep-21 the Rubicon was finally crossed with net SIP flows of Rs10,351cr. SIPs matter because they represent the large-scale retail participation in equity and related funds. Above all, SIPs also underline the long term commitment of MF investors.
This is the momentum that has taken a long time to build. The mutual funds and AMFI now need to target Rs20,000 crore in monthly SIP flows, SIP folios of 10cr and SIP AUM at 80% of equity AUM. That will be the real coming of age of mutual funds in India!