Quarterly mutual fund flows throw up interesting trends in Dec-20

The real boost to overall MF AUM came from equity price appreciation; thanks to the frenetic market rally.

Jan 25, 2021 07:01 IST India Infoline News Service

The latest quarterly data on flows into Indian mutual funds, put out by AMFI, present an interesting perspective of how the mutual fund flows have moved in the midst of one of the biggest rallies in the Nifty and the Sensex. Broadly, the macro picture looks great, As of the end of the Dec-20 quarter, the AUM of the Indian mutual fund segment stands well above Rs31 trillion.

It may be recollected that as late as March 2020, the total AUM of the Indian mutual fund segment stood at around Rs24 trillion. What triggered this burst? Actually, there have been two critical factors. Firstly, the debt fund flows have been robust as have been the flows into passive funds and gold funds. However, flows into equity funds and balanced funds (especially the aggressive hybrid funds) have been deep in the negative. The real boost to overall MF AUM came from equity price appreciation; thanks to the frenetic market rally.

How did debt fund flows pan out in Dec-20 quarter?
Flows into Debt Funds in the Dec-20 quarter (AMFI)
Funds Mobilized Redemptions Net Flow Net AUM as of Dec-20
Rs18.50 trillion Rs16.81 trillion Rs1.69 trillion Rs14.06 trillion

Clearly, the fund flows into debt funds have been robust in the Dec-20 quarter at Rs169,313cr. What were the big contributors to this inflow in the Dec-20 quarter? Low duration funds saw inflows of Rs35,496cr, Corporate bond funds Rs34,755cr and short duration funds Rs32,203cr. These were the big drivers. Significant contributions also came from Liquid funds Rs16,270cr, Ultra Short Duration Rs13,926cr, Floater Funds Rs11,836cr and Banking & PSU Funds Rs11,500cr. These were the major contributors.

There were some negative contributors too in the Dec-20 quarter. Overnight funds saw outflows of (Rs3,197cr) while long duration funds and credit risk funds jointly saw outflows of (Rs775cr) in the Dec-20 quarter. The total AUM of all debt funds at the end of the Dec-20 quarter stood at Rs14.06 trillion accounting for 45.32% of the total mutual fund AUM.

How did equity fund flows pan out in Dec-20 quarter?
Flows into Equity Funds in the Dec-20 quarter (AMFI)
Funds Mobilized Redemptions Net Flow Net AUM as of Dec-20
Rs57,783cr Rs83,572cr Rs25,789cr Rs9.07 trillion

The pressure of profit booking at higher levels and the lag effect of the pandemic ensured that equity fund inflows were negative in all months in the Sep-20 quarter and the Dec-20 quarter. Equity funds in the Dec-20 quarter saw net outflows of Rs25,789cr. What were the big contributors to this outflow in the Dec-20 quarter? There was redemption pressure across all classes of equity funds. The biggest outflows were seen in Multi-Cap funds (Rs8,286cr), Large Cap funds (Rs7,716cr), Contra Funds (Rs4,165cr), Mid Cap Funds (Rs3,509cr), ELSS (Rs2,353cr), small cap funds (Rs2,212cr) and Focused funds (Rs1,902cr).

Interestingly, there were a couple of positive contributors too. Sectoral funds saw positive flows of Rs4,639cr while Dividend Yield funds saw inflows of Rs1,362cr. The total AUM of all equity funds at the end of the Dec-20 quarter stood at Rs9.07 trillion accounting for 29.23% of the total mutual fund AUM.

How did hybrid fund flows pan out in Dec-20 quarter?
Flows into Hybrid Funds in the Dec-20 quarter (AMFI)
Funds Mobilized Redemptions Net Flow Net AUM as of Dec-20
Rs25,564cr Rs38,427cr Rs12,863cr Rs3.18 trillion

The story of hybrid funds in the Dec-20 quarter is largely a story of aggressive hybrid funds which are predominantly equity-based. These funds mirrored the risk of equities without mirroring the risk mitigation of debt. That led to a spate of redemption from hybrid funds. Also, the shift in dividend taxation led to a sharp outflow from aggressive hybrid funds.

The biggest contributor to the outflows was aggressive hybrid funds which saw outflows of (Rs10,035cr). In addition, dynamic allocation funds also saw outflows of (Rs1,770cr) in the Dec-20 quarter as did multi-allocation funds to a smaller extent. The arbitrage funds saw positive inflows of Rs631 crore in the Dec-20 quarter but that could be misleading as the trend has changed sharply after yields fell. The total AUM of all hybrid funds at the end of the quarter stood at Rs3.18 trillion accounting for 10.24% of the total mutual fund AUM.

How did passive fund flows pan out in Dec-20 quarter?
Flows into Passive Funds in the Dec-20 quarter (AMFI)
Funds Mobilized Redemptions Net Flow Net AUM as of Dec-20
Rs31,929cr Rs24,909cr Rs7,020cr Rs2.95 trillion

Passive funds have been the one real gratifying and emerging story of the quarter. Within the passive segment, index and CPSE ETFs saw the highest inflows to the tune of Rs4,812cr. This was followed by Rs1,789cr inflows into Fund of Funds (FOFs) and a much smaller inflow of Rs674cr into gold funds. The total AUM of all passive funds at the end of the quarter stood at Rs2.95 trillion accounting for 9.50% of the total mutual fund AUM. Perhaps, that will be the big growth area to drive MF flows in the future!

Related Story

Open Free Demat Account (Rs699)