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Equity fund flows double as SIPs again rule in Nov-21

The overall AUM in Nov-21 was virtually flat at Rs37.34 trillion on a closing AUM basis. While debt funds also saw inflows, the flows into traditional equity funds doubled while the net inflows into hybrids and passives remained robust.

December 10, 2021 12:11 IST | India Infoline News Service
Compared to the previous 4 months, NFOs were relatively tepid in Nov-21. In the months of July and August, NFOs accounted for Rs40,000cr of net inflows, driven by multi-cap funds and balanced advantage fund. In Sep-21 and Oct-21, the NFO flows contributed over Rs16,000cr. In Nov-21, NFOs contributed just Rs2,705cr largely dominated by the robust response to the LIC MF Balanced Advantage Fund NFO, which collected Rs1,042 crore.

The overall AUM in Nov-21 was virtually flat at Rs37.34 trillion on a closing AUM basis. While debt funds also saw inflows, the flows into traditional equity funds doubled while the net inflows into hybrids and passives remained robust. Here is a quick look at the AUM-cum-NFO chart as of Nov-21.

Data Source: AMFI

The AUM accretion via net inflows in Nov-21 was robust at Rs46,165cr across categories, but this was largely neutralized by the fall in the market leading to static AUM. The AUM mix as on 30-Nov was Income Funds (38.89%), equity funds (34.24%), hybrid funds (12.46%) and passive & solution funds (12.76%). The residual 1.65% were close-ended funds, where AUM fell further in Nov-21 due to Rs870cr redemptions from other equity funds. Overall AUM grew 24.43% from Rs30.01 trillion to Rs37.34 trillion year-on-year. In the last 1 month, debt funds gained marginal share at the cost of equity funds due to the market fall. The gap between the share of debt funds and equity funds has narrowed considerably, but hybrid funds and passive funds have emerged as distinct asset classes in India.

Debt funds flows robust in Nov-21, with marginal market share gains

The month of Nov-21 saw a sharp surge in inflows into liquid funds with all the other debt fund categories witnessing outflows. That looks like treasury management ahead of the advance tax payments by corporates and quarterly payments in December. The month of Nov-21 saw overall inflows into debt funds to the tune of Rs14,893cr. First the category inflows! Liquid Funds was the only category to see substantial inflows to the tune of Rs53,251cr, with minor inflows in short duration funds and medium-long duration funds.

There were a large number of debt fund categories that saw outflows in Nov-21. Among the specific debt fund categories, Overnight Funds saw outflows of Rs12,123cr, low duration funds saw outflows of Rs6,674 crore and floater funds saw outflows of Rs5,169cr. Among other categories seeing outflows were corporate bond funds Rs4,593cr, ultra-short duration funds Rs4,571cr, Banking & PSU funds Rs4,193cr and Gilt Funds Rs865cr. Clearly, markets were getting wary of banking funds and gilt funds with strong indications of a likely spike in yields in the market.

Equity Fund inflows double in Nov-21 despite limited NFO support

Net inflows into equity funds more than doubled to Rs11,615cr in Nov-21. Not a single category of equity funds saw outflows during the month.

Data Source: AMFI

Let us turn to the inflows into equity funds in Nov-21. The inflows were across the board. Multi-cap funds plus flex-cap funds saw inflows of Rs3,008cr. Among other key categories, Sector Funds saw inflows of Rs1,522cr, Large Cap funds Rs1,624cr, large & mid-cap funds Rs1,225cr, mid-cap funds Rs1,280cr, focused funds Rs1,507cr and small cap funds Rs782cr. Other inflows were much smaller. Equity funds saw cumulative net inflows of Rs85,381cr in the 9 months since Mar-21.

Balanced Advantage Funds were again the hybrid story of Nov-21

Net flows into hybrid funds remained robust at Rs9,422 crore. The allure of balanced advantage funds continued after the SBI NFO and the NJ NFO as this category saw inflows of Rs6,094cr in Nov-21. This also included the Rs1,042cr that LIC Balanced Advantage Fund collected as part of its NFO. Among other categories, arbitrage funds saw inflows of Rs1,045cr, equity savings funds Rs869cr and aggressive hybrids Rs648cr.

It looks like investors are finally buying the haystack instead of looking for the needle in the haystack. In Nov-21 the passive category saw inflows of Rs11,024cr. Index funds saw smart inflows of Rs3,521cr while Debt ETFs saw inflows of a hefty Rs6,483cr. The other categories of gold ETFs and FOFs also attracted positive flows of Rs683cr and Rs338cr respectively. The hybrid, passive and solution funds put together account for 25.22% of overall AUM; now a distinct asset class in the mutual fund palate.

SIPs cross Rs11,000cr in Nov-21

In Sep-21 the magic mark was finally crossed with net SIP flows of Rs10,351cr. That trend has been accentuated in Oct-19 with net SIP flows of Rs10,519cr. Nov-21 marks the third successive robust month with SIP inflows of a record Rs11,005cr. SIPs are material because they represent the large-scale retail participation in equity and related funds; and also to a large extent, the millennial and financial planning population. SIPs are representative of the long term commitment of MF investors.

In Nov-21, the SIP flows have risen despite weak and volatile markets. That is good news as it shows that people are divorcing their long term financial goals from short term market volatility. That could be the big takeaway for Nov-21.

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