In Jun-21, the average AUM stood at a record level of Rs34.3 trillion while the closing AUM also touched highs of Rs33.67 trillion. Remember, June was a relatively tepid month for the Nifty, but that was more than compensated for by the rally in non-index stocks; especially mid-caps and small caps. The AUM composition as on 30-Jun was Income Funds (41.17%), equity funds (32.97%), hybrid funds (11.51%) and passive and solution funds (11.64%). The residual 2.71% were close-ended funds, where AUM fell sharply in June due to Rs10,537cr redemptions in FTPs and Rs1,380cr in equity plans. Overall AUM grew 32.1% from Rs25.49 trillion to Rs33.67 trillion year-on-year. In June 2021, AUM of equity funds, hybrid funds and passive funds gained at the cost of debt funds.
Debt funds see tepid inflows in Jun-21, but redeemed by floaters
After the massive outflow from debt funds in May-21, flows in Jun-21 sobered but overall debt fund flows remained tepid at Rs3,566cr. There was a good deal of corporate money flowing out of money market funds and into low-duration funds in search of better yields. Overall, floating rate funds emerged the star among debt funds in Jun-21.
Here is a quick look at the specific outflows. Money market funds saw massive net outflows of Rs13,988cr while Ultra Short Duration funds saw outflows of Rs2,440cr. Smaller outflows of Rs1,057cr in the case of short-duration funds and Rs538 crore in gilt funds were seen. The debt fund shifts appear to be more of a treasury repositioning by corporates with the general consensus veering towards hardening of bond yields.
There were a number of debt fund categories that saw sharp inflows too. Among the specific debt fund categories that witnessed inflows in Jun-21, floater funds saw inflows of Rs6,319cr while low duration funds saw inflows of Rs6,273cr. Among the other categories of debt funds that saw meaningful inflows included overnight funds at Rs4,460cr, liquid funds at Rs2,079cr and Banking & PSU funds at Rs1,358cr. The underlying theme appears to be two-fold; there is a risk-on play in markets and there is also expectation of yield spike.
Equity fund inflows tapered sharply in Jun-21
Equity fund flows have see-sawed in last four months. We saw equity fund inflows of Rs9,115cr in March but fell to Rs3,437cr in April. Equity flows were again robust at Rs10,083cr in May but tapered by 41% to Rs5,988. To be fair, if you add the Rs1,380cr outflows from closed ended equity funds, then the net equity fund inflows would have been just around Rs4,600cr. The gist of the story still is that equity fund flows tapered in Jun-21.
Let us focus on specific categories of equity funds that saw inflows. Barring ELSS funds and value funds, all other categories saw net inflows in Jun-21. Among the big inflows, mid-cap funds attracted Rs1,729cr while sectoral funds got Rs1,207cr and Flexi Cap funds attracted Rs878cr. Additionally, large & mid-cap funds attracted Rs800cr while small-cap funds attracted Rs705cr in Jun-21. The skew appears to be more towards alpha with categories like small caps, mid-caps and sectoral themes attracting maximum inflows in Jun-21. Overall, equity funds saw inflows of Rs28,623cr in the last four months since Mar-21.
Arbitrage funds flatter, ETFs and FOFs stand up
Hybrid funds actually continued to build heft with record net inflows of Rs12,362cr in Jun-21. Of course, the aggressive balanced funds continue to see outflows, but dynamic funds saw net inflows of Rs2,057cr. However, it was arbitrage funds that made the big difference with net inflows of Rs9,060cr in Jun-21. As markets get more volatile, the cash-futures arbitrage opportunities have also widened. This has made arbitrage funds more attractive.
If hybrid funds are catching up fast, passive funds are not too far behind. Debt ETFs saw inflows of Rs3,012cr while index funds saw inflows of Rs1,687cr. While gold ETF flows were tepid at Rs360cr, International FOFs saw net inflows of Rs792cr. With net inflows of Rs18,212cr into hybrid and passive funds, this looks like the new hot story in mutual funds.
SIP story has set some new records
Systematic investment plans (SIPs) saw inflows at Rs8,591cr in Apr-21 and Rs8,819cr in May-21 while June further impressed with SIP flows of Rs9,156cr. SIPs already account for over 40% of the total equity fund AUM. During the month of June, SIP folios crossed 4 crore mark for the first time, giving an indication of a long-haul source of flows into mutual funds.