Passive funds save the day for MF flows in July 2022

  • India Infoline News Service
  • 09 Aug , 2022
  • 10:11 AM
For the month of July 2022, inflows into equity funds and debt funds stayed positive. However, the strength of flows into active funds were relatively tepid. That was more than compensated by the strong inflows into passive funds during the month. However, selling pressure was visible in hybrid funds, especially arbitrage funds.

However, there were 2 stories to savour in the month of July. Firstly, despite the volatility, SIP flows in July 2022, was almost stable at Rs12,140 crore. The second good news was that NFOs reopened after a 2 month hiatus. However, as of end July 2022, a number of NFOs are still open so a clearer picture of NFO flows should emerge when we get the August data.

The overall MF AUM in July 2022 bounced sharply to Rs37.75 trillion. This was on the back of a sharp bounced in the markets and a rally across the board. The Nifty and the Sensex have bounced more than 12% from the recent lows and that has driven a lot of value in equity fund AUMs. However, overall AUM is still short of the peak.

Data Source: AMFI

Overall MF net inflows for July 2022 stood at Rs23,605 crore. This was driven by open ended debt fund inflows of Rs4,930 crore, open ended equity fund inflows of Rs8,898 crore and passive fund inflows of Rs14,271 crore. However, hybrid funds saw outflows of Rs(5,146) crore. Closed ended funds saw net inflows of Rs599 crore in July 2022, largely on the strength of Fixed Term Plan NFOs. The current AUM mix is; Income Funds (33.02%), equity funds (37.50%), hybrid funds (12.86%) and passive & solution funds (15.95%). The residual 0.67% was accounted for by close-ended funds.

It may be recollected that in March 2022, the AUM of active equity funds had decisively crossed that of debt funds. That lead has been sustained since and in the month of July, that lead has sharpened due to the sharp rally in the market. Debt funds have been facing pressure due to redemptions as well as due to the price impact of rising bond yields. Overall MF AUM grew just 5.18% yoy from Rs35.89 trillion in July 2021 to Rs37.75 trillion in July 2022. Hybrids, solution funds and passive funds account for 28.81% of the total AUM.

Debt fund flows cautious in July 2022 amidst rising yields

In the last 5 months, debt funds saw sharp outflows in March, May and June. April was the sole exception and now there are marginal net inflows into debt funds in July 2022. The outflows in the recent past could be attributed to treasury pressures from corporate funds and fear of rising yields. Debt funds inflows were fairly subdued with most of the inflows coming into Overnight funds. Overall open-ended debt fund inflows were Rs4,930 crore in July 2022. The selling was prominent across low duration, long duration and even floater funds in the month of July 2022.

Here we first look at the debt fund inflows in July 2022. The funds that saw substantive positive inflows include Overnight funds Rs19,919 crore, Ultra Short Duration Funds Rs3,728 crore and Money Market Funds Rs2,639 crore. The net inflows clearly betray a sense of bond buyers playing it safe by staying at the short end of the yield curve to avoid price risk.

We now turn to the category of debt funds that saw outflows in July 2022. Big selling was visible in Liquid funds Rs7,693 crore, Floater Funds Rs4,682 crore, Banking and PSU funds Rs2,810 crore, Corporate Bond Funds Rs2,582 crore, short duration funds Rs1,872 crore and low duration funds Rs646 crore. Surprisingly, even floater funds are seeing selling, despite the bond yields moving up closer to 7.4% on the 10-year benchmark.

NFOs return, but SIPs boost equity fund flows in July 2022

In the month of July 2022, the sharp rise in the indices and the FPI inflows gave a lot of confidence to mutual fund investors to buy into equity funds. However, the big story of the month was still the persistency of SIP flows, which stayed robust at Rs12,140 crore. The NFOs have just restarted in July 2022 and the impact should be visible in this quarter. Overall equity fund inflows at Rs8,898 crore may not be exciting but the big takeaway is that, once again, not a single category of equity fund saw net outflows in July 2022.

Let us turn to specific category-wise inflows. During July 2022, Multi-cap funds plus flexi-cap funds led the way with inflows of Rs1,906 crore. Small Cap funds collected Rs1,780 crore, mid cap funds got inflows of Rs1,245 crore, large & mid cap funds saw inflows of Rs1,120 crore and large cap funds attracted flows of Rs1,091 crore. Among others, focussed funds saw inflows of Rs773 crore, contra funds Rs427 crore and ELSS funds Rs328 crore. The order of preference appears to be shifting in favour of small and mid-cap funds for alpha gains.

One parameter that tells you the story of sustainability of equity fund flows is folio accretion. Folios are MF investor accounts and give a good idea of the retail spread of demand. As of the close of July 2022, equity folios touched an all-time high of 902.53 lakh folios out of total mutual fund folios of 1,355.74 lakhs; or 66.57% share of overall folios.

Same story; Hybrid funds see outflows, passive funds come out trumps

Hybrid funds saw outflows of Rs5,146 crore in July 2022. This is similar to the trend that we have seen in last few months. Two factors worked against hybrid funds in July 2022. Firstly, NFOs have just started but we are yet to see the popular BAF funds, as the focus is currently on passive funds NFOs. Secondly, arbitrage funds saw heavy outflows of Rs6,408 crore. Other hybrid categories like aggressive hybrids and BAFs saw net inflows in July 2022.

Passive funds were the big story of July 2022. These passive funds saw healthy inflows of Rs14,271 crore as investors looked for lower cost alpha. The passive surge was led by equity & debt index ETFs at Rs7,635 crore followed by index funds at Rs6,779 crore. Index ETFs got a boost from the NFO rush. Gold ETFs saw outflows in July while the international FOFs saw net inflows in the month. Most NFOs tend to gravitate towards passive funds since these funds do not have product level limits. For passive funds, NFOs could be the next big story.

Mutual fund flows have de-coupled from market gyrations

On an overall basis, mutual funds saw net inflows of Rs23,605 crore in July 2022, largely on account of strong inflows into passive funds followed by active equity funds. Despite the domestic and global uncertainty, SIP flows were stable at Rs12,140 crore in July 2022. So, would it be fair to say that mutual fund flows have de-coupled from market gyrations. A few swallows, do not make a summer; but Indian mutual funds may be gradually getting there.
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July 2022 SIP flows prove that investors are really persisting

  • India Infoline News Service
  • 09 Aug , 2022
  • 7:51 AM
It may be recollected that in FY22, SIP flows had touched record levels of Rs124,566 crore and going by the early estimates for the first 4 months up to July, FY23 promises to be bigger and stronger in terms of SIP flows.  Here is how.

Data Source: AMFI

As can be seen in the above chart, April 2022 saw a modest tapering of SIP flows to Rs11,863 crore but bounced back to Rs12,286 crore in the month of May 2022. It has been stable since. For June 2022, SIP flows were stable at Rs12,276 crore and at Rs12,140 crore in July 2022. Before the maze, a quick detour on why investors gravitate to SIPs!

A quick detour: Why are investors gravitating towards SIPs?

Before going into the nuances of SIP flows in July 2022, here is a quick detour to understand why Indian investors are gravitating towards SIPs or systematic investment plans.

a)      In a sense, the experience of 2020 has been a great teacher. Many investors tried to time the market and exited their SIPs around the pandemic. However, it was the investors who persisted with their SIPs, who were laughing all the way to the bank.

b)      There is an automatic fit between the income flows and SIP outflows. Nothing can be more disciplined than setting aside a small sum each month for your long term goals. Apart from the discipline, it is easy to understand and elegant to execute.

c)      It saves investors the hassles of timing the market. Most investors are wiser and realize that timing the market is a zero-sum game. A few bad days and all your efforts come to nought. The best way out is to adopt an agnostic approach to investing like SIPs.

d)      Lastly, the power of SIPs can be tested and verified with real data. If you run a SIP through 2 or 3 cycles, you invariably end up better off in a SIP. Timing the market has just given people the ulcers without any performance to show.

It is a combination of factors that has driven SIPs, but it must be said that the post pandemic period was a natural energizer to the concept of SIPs. Now, back to SIP data.

Reading through the SIP story of July 2022

FY23 may have just completed just 4 months, but we now have data for 6 years in terms of monthly and annual SIP flows. If you look at the underlying secular trend, it has been consistently growing, except for the brief lull in FY21, due to the pandemic. In the chart below, FY23 data is annualized, so not strictly comparable. However, with each passing month, the FY23 data is increasingly reflective of the full-year trend. One thing we noticed in FY22 was that the full year trend is captured quite effectively by the end of Q1.

Data Source: AMFI (FY23 data is annualized)

Since absolute numbers are misleading, the average monthly SIP ticket (AMST) can be an answer. This has been on a steady uptrend over last 6 years. AMST was Rs3,660 crore in FY17, Rs5,600 crore in FY18, Rs7,725 crore in FY19, Rs8,340 crore in FY20, Rs.8,007 crore in FY21 and Rs10,381 crore in FY22. In FY23, AMST as of July 2022 stands at Rs12,141 crore.

What are the key takeaways? Firstly, SIP flows have been robust and with NFOs reopening in July, we should wait for the double effect. Secondly, SIP flows have remained stable despite global and domestic headwinds like recession fears, China slowdown, inflation, OPM stress, and valuation concerns. Investors have learnt that in SIPs; only persistence pays.

SIP folio, SIP AUM and the spread story for July 2022

SIP flows in rupee terms can be enticing and simple, but at times misleading too. SIP flows do not capture the retail intensity of SIP flows or the retail distribution. That is captured by SIP folios and SIP AUM. Both, SIP folios and SIP AUM can be used as proxies for assessing retail spread, although SIP folios (MF accounts unique to an AMC) are more reliable.

How did the SIP folio growth story pan out in July 2022? The number of SIP folios increased from 554.89 lakhs in June 2022 to 561.94 lakhs in July 2022. That is monthly net accretion of 7.05 lakh SIP folios or 1.27%. The momentum of SIP folio accretion has been falling, but that can be attributed to uncertain market conditions and lethargy at higher levels. Even if you factor in multiple folios and non-equity folios, the folios growth still reflects a good picture of retail intensity. It may not be precise; but a fair median nevertheless!

What about SIP AUMs? The SIP AUM (assets under management) increased sharply from Rs551,189 crore in June 2022 to Rs609,296 crore in July 2022. This spike of 10.54% in SIP AUM in July 2022 can be almost entirely attributed to the sharp spike in equity indices. However, the retail SIP folio accretion in July has been better than June, so there is retail intensity that is still being built. In short, retail appetite for equity funds is robust. As of July 2022, SIP AUM accounted for one-third of overall retail Mutual Fund AUM.

SIP stoppage ratio spikes in FY23

SIP stoppage ratio is the ratio of SIP accounts discontinued in a specified period to the new SIP accounts opened. Lower this ratio, the better it is as it indicates higher retention of SIP investors. After all, you don’t want your SIP investors exiting and going away. You really want to retain them. Some of the longer term trends are interesting. For FY20, the SIP stoppage ratio for the full year was 57.84% while for FY21 it was 60.88%.

The high SIP stoppage ratios in FY20 and FY21 can be attributed primarily to the COVID induced uncertainty. Cash flow emergencies also forced investors to redeem mutual funds. However, in FY22, the SIP stoppage ratio gravitated sharply lower to 41.74%. That is within the acceptable SIP stoppage ratio range of 40% to 45%. However, the first 4 months of FY23 have shown a sharp deterioration in SIP stoppage ratio.

Between April 2022 and July 2022, the SIP stoppage ratio stands at 55.53%. In June 2022, the SIP stoppage ratio had touched a high of 63.86%; almost back to the pandemic levels. In comparison, the SIP stoppage ratio has tapered to 59.53% in July 2022. However, for the first four months overall, the SIP stoppage ratio is above comfort zone at 55.53%.

The millions dollar question is where is the next big thrust to the SIP story going to come from? The last big surge in SIP accounts came from the millennials entering the equity and mutual fund market. That trend may still be around, but the momentum could be waning. Remember, there are 26 crore life insurance holders, 60 crore bank account holders and 90 crore mobile phone owners. That would be the next step in the pyramid to tap for SIPs.

India's best performing mutual funds for July 2022

  • India Infoline News Service
  • 01 Aug , 2022
  • 9:32 AM
In July 2022, the Nifty surged by +8.73%. This comes after 4 consecutive months of fall in the Nifty. The robustness was also visible in the smaller indices. In July 2022, the mid-cap index rallied by +12.03% while the small cap index also surged by +9.29%. The broad-based rally was also manifested in the improvement in advance / decline ratio of the overall market. But, what exactly led to this sharp rally in the indices, especially in the 2nd half of July 2022?

One of the primary driving factors for the rally was the turnaround in FPI sentiments. After being net sellers for 9 months since October 2021, FPIs turned net buyers to the tune of Rs4,989 crore in equities in the month of July 2022. One can argue that the inflow is just about $618 million against FPI outflows of $35 billion, but it is the shift in sentiments that really matters. The other factor was the Fed going relatively soft and indirectly hinting that they may do a rethink if the US economy saw negative growth. These factors helped the rupee stabilize around the 80/$ levels and aided the bounce in the stock market indices.

During July 2022, the 10 year bond yields trended lower compared to June 2022 and stayed in the range between 7.2% and 7.4%. The panic of June was not visible in July and that helped bond prices stabilize, which was reflected in better performance by the debt funds, especially the ones with longer duration. One factor responsible for the stable bond yields was the hope that the RBI would go slow in its August MPC meeting, even if the Fed opted for a more hawkish tone. Here is the mutual fund performance story of July 2022.
  1. Equity Large-Cap Funds
Top performing Regular Plans (Growth Option) on 5-year returns (as on 31st Jul-22):

Name of Fund 1-Year Return 3-Year Return 5-Year Return
Canara Robeco Blue-Chip (G) 3.972% 17.929% 13.165%
Axis Blue-Chip Fund (G) 1.338% 14.366% 13.020%
ICICI Pru Blue Chip (G) 10.511% 16.632% 11.615%
Data Source: Morningstar
  1. Equity Multi-Cap Funds
Top performing Regular Plans (Growth Option) on 5-year returns (as on 31st Jul-22):

Name of Fund 1-Year Return 3-Year Return 5-Year Return
Quant Active Fund (G) 7.257% 32.965% 20.987%
Mahindra Manulife Multi (G) 4.798% 23.231% 13.391%
Nippon India Multi Cap (G) 18.118% 18.456% 12.242%
Data Source: Morningstar
  1. Equity Mid-Cap Funds
Top performing Regular Plans (Growth Option) on 5-year returns (as on 31st Jul-22):

Name of Fund 1-Year Return 3-Year Return 5-Year Return
Quant Mid-Cap Fund (G) 12.656% 34.271% 19.147%
PGIM India Mid-Cap Fund (G) 10.708% 37.904% 17.751%
Axis Mid-Cap Fund (G) 4.621% 24.053% 16.914%
Data Source: Morningstar
  1. Equity Small-Cap Funds
Top performing Regular Plans (Growth Option) on 5-year returns (as on 31st Jul-22):

Name of Fund 1-Year Return 3-Year Return 5-Year Return
Quant Small Cap Fund (G) -1.793% 44.363% 19.881%
Axis Small Cap Fund (G) 7.788% 29.150% 18.369%
SBI Small Cap Fund (G) 9.307% 29.017% 17.637%
Data Source: Morningstar
  1. Equity Linked Savings Schemes (Tax Saving)
Top performing Regular Plans (Growth Option) on 5-year returns (as on 31st Jul-22):

Name of Fund 1-Year Return 3-Year Return 5-Year Return
Quant Tax Plan (G) 8.515% 35.762% 20.507%
Canara Robeco Tax Saver (G) 5.587% 21.534% 15.111%
Mirae Asset Tax Saver (G) 4.945% 20.360% 14.674%
Data Source: Morningstar
  1. Balanced Funds (Aggressive Allocation)
Top performing Regular Plans (Growth Option) on 5-year returns (as on 31st Jul-22):

Name of Fund 1-Year Return 3-Year Return 5-Year Return
Quant Absolute Fund (G) 8.196% 27.955% 17.750%
ICICI Pru Equity & Debt (G) 16.716% 19.564% 13.215%
BOI AXA Mid and Small (G) -1.775% 25.185% 11.809%
Data Source: Morningstar
  1. Balanced Funds (Conservative Allocation)
Top performing Regular Plans (Growth Option) on 5-year returns (as on 31st Jul-22):

Name of Fund 1-Year Return 3-Year Return 5-Year Return
Kotak Debt Hybrid (G) 5.020% 10.815% 8.012%
ICICI Pru Regular Savings (G) 6.785% 9.202% 7.871%
Canara Robeco Hybrid (G) 3.347% 9.542% 7.567%
Data Source: Morningstar
  1. Arbitrage Funds (Cash-Futures)
Top performing Regular Plans (Growth Option) on 5-year returns (as on 30th Jun-22):

Name of Fund 1-Year Return 3-Year Return 5-Year Return
Kotak Equity Arbitrage (G) 3.463% 4.172% 5.063%
Nippon India Arbitrage (G) 3.264% 4.047% 5.053%
Edelweiss Arbitrage Fund (G) 3.386% 4.170% 5.027%
Data Source: Morningstar
  1. Government Securities Funds (Gilt Funds)
Top performing Regular Plans (Growth Option) on 5-year returns (as on 31st Jul-22):

Name of Fund 1-Year Return 3-Year Return 5-Year Return
Edelweiss G-Sec Fund (G) 2.523% 6.016% 7.321%
DSP G-Sec Fund (G) 2.455% 6.131% 6.697%
IDFC G-Sec Fund (G) 1.372% 5.899% 6.657%
Data Source: Morningstar
  1. Corporate Bond Funds
Top performing Regular Plans (Growth Option) on 5-year returns (as on 31st Jul-22):

Name of Fund 1-Year Return 3-Year Return 5-Year Return
ABSL Corporate Bond (G) 3.110% 6.863% 7.133%
L&T Triple Ace Bond (G) 2.296% 6.160% 6.929%
HDFC Corporate Bond (G) 2.483% 6.455% 6.887%
Data Source: Morningstar
  1. Credit Risk Funds
Top performing Regular Plans (Growth Option) on 5-year returns (as on 31st Jul-22):

Name of Fund 1-Year Return 3-Year Return 5-Year Return
ICICI Pru Credit Risk Fund (G) 4.860% 7.664% 7.288%
HDFC Credit Risk Fund (G) 3.549% 7.558% 6.900%
Baroda Credit Risk Fund (G) 12.571% 7.864% 6.558%
Data Source: Morningstar
  1. Liquid Funds
Top performing Regular Plans (Growth Option) on 5-year returns (as on 31st Jul-22):

Name of Fund 1-Year Return 3-Year Return 5-Year Return
Quant Liquid Plan (G) 3.918% 4.659% 5.635%
IDBI Liquid Fund (G) 3.726% 4.207% 5.398%
Mahindra Manulife Liquid (G) 3.705% 4.111% 5.339%
Data Source: Morningstar

The month of July 2022 was a welcome change as the large cap and the mid cap indices gave strong and affirmative returns. If June was the month of macro chaos, then July 2022 was a month of relative stability. That was reflected in the equity markets. Of course, the risk of central banks staying hawkish is still there and commodity inflation will take much longer to go away. However, markets are convinced that the central banks are on the right track and the economic results should follow sooner rather than later.

The good news is that the equity and debt fund rankings have largely maintained consistency of top performers across categories. This makes the rankings a reliable barometer and decision point for investors. Just as equity funds gained from relatively stable macros and FPI flows, debt markets also benefited from bond yields topping out. The story would eventually be scripted by central banks, but for July; there has been some respite for equity and debt funds. That is the good news!


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  • 09 August, 2022 |
  • 10:36 AM

The SIP flow data for July 2022 released by AMFI were once again absolutely stable compared to May and June.

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