The broader perspective since March 2020 is of a 37% spike in the total mutual fund AUM in a span of just 10 months. Of course, this is largely on the strength of the 100% rally in the Nifty, but the fact remains that overall AUM of Indian mutual funds stays above the coveted Rs30 trillion mark.
Debt funds see sharp outflows in Jan-21
After sharp inflows of nearly Rs156,000cr into debt funds in the months of Nov-20 and Dec-20, January saw debt fund outflows to the tune of Rs33,409cr. To an extent the exits were most prominent in short-end debt as there were fears that a high fiscal deficit would mean the RBI would be at pains to keep the yields capped. In fact, the budget eventually did announce a record high fiscal deficit of 9.5% and the RBI did try to cap yields at 6%.
The outflows from debt funds were dominated by liquid funds, which saw outflows of Rs45,316cr. This can be partially explained by liquidity needs of corporates but there was also disappointment with the very low yields on liquid funds. Corporates have been looking to switch to even higher risk funds in search of better yields. Other than liquid funds, low duration funds and money market funds also saw combined outflows of Rs9,084cr in Jan-21.
There were debt fund stories of inflows too. Short duration funds did see inflows of Rs6,893cr as there was some yield hunting. Corporate bond funds saw inflows of Rs5,429cr while banking and PSU funds also saw inflows of Rs1,740cr in Jan-21. Floater funds saw inflows of Rs3,128cr on hopes that yields could harden, albeit a tough assumption.
Seventh month of outflows in equity funds in Jan-21
Let us look at the multi-cap trend first. Ironically, multi-cap funds saw inflows of Rs2,858cr while flexi-cap funds saw outflows of Rs5,934cr. This is more because 16 multi-cap funds re-classified as flexi-cap funds, so they basically mean the same thing. It must be seen as a net outflow of Rs3,076cr from multi-cap / flexi-cap fund as a category. The only category to see significant positive inflows in Jan-21 were sector funds at Rs2,586cr.
Outflows were more common among equity fund categories. Mid-cap and small-cap funds saw outflows of Rs2,778cr between them. In addition, value funds and ELSS funds saw outflows to the tune of Rs2,460cr between them. With robust SIP inflows, it is a clear indication of bulk selling in equity funds, especially from lump-sum investors.
Aggressive Hybrids see pressure, arbitrage funds look up in Jan-21
The concerns over equity funds spilled to aggressive hybrid funds once again as was evident in the net redemption of Rs3,377cr in aggressive hybrids. The selling was due to a mix of valuation discomfort and annual capital booking to save tax. There was a huge inflow of Rs5,235cr into arbitrage funds. The volatility in markets helped arbitrage funds deliver better returns as investors hunted for better yields.
Again, passive funds were the stars with Rs7,966cr of inflows in Jan-21. Inflows into CPSE ETFs were Rs6,133cr. The two categories that had attracted interest lately i.e. gold funds and FOFs saw net inflows of Rs625cr and Rs755cr respectively.
SIPs taper in Jan-21 but hold above Rs8,000cr
In the month of Dec-20 we had spoken about the sharp bounce back in SIPs to Rs8,418cr. This tapered by around 5% to Rs8,023cr in Jan-21 but it is psychologically encouraging as it remains above the Rs8,000cr mark. But the good news is that SIP folios have been growing.
In the month of January, 8.78 lakh new SIP accounts were added taking the total SIP AUM to Rs355,000cr or roughly 12% of total AUM. This SIP AUM is predominantly equity and ELSS Funds and so the SIP AUM accounts for 40% of Equity AUM. That is the real good news!