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Surge in NFOs boost equity fund flows in Dec-21

  • India Infoline News Service
  • 11 Jan , 2022
  • 1:40 PM
The story of equity flows in the month of Dec-21 was a story of NFOs. The NFO collections in Dec-21 at Rs20,616cr was more than the combined flows in the previous 3 months. However, the NFO flows in December was below the record flows of July. In the last 6 months since Jul-21, NFO flows were in excess of Rs80,000cr, largely driven by multi-cap, flexi-cap and BAF themes.

The overall AUM in Dec-21 was higher at Rs37.73 trillion on a closing AUM basis. While debt funds saw heavy outflows due to year-end treasury considerations, the flows into traditional equity funds doubled while the net inflows into passives remained extremely robust. Here is a quick look at the AUM-cum-NFO chart as of Dec-21.

Data Source: AMFI

The AUM net outflow for Dec-21 stood at Rs(4,350)cr overall due to the heavy selling in debt funds and other treasury products. The AUM mix as on 31-Dec was Income Funds (37.24%), equity funds (35.35%), hybrid funds (12.47%) and passive & solution funds (13.30%). The residual 1.65% were close-ended funds, where AUM was almost flat. This gap of 189 bps between equity fund AUM and debt fund AUM is the lowest in history. Overall AUM grew 21.63% yoy from Rs31.02 trillion to Rs37.73 trillion. In Dec-21, the share of hybrid funds has remained static but equity funds and passive funds gained AUM market share at the expense of debt funds.

Debt funds see heavy outflows in Dec-21

Debt funds overall saw outflows of Rs49,154cr, largely on account of treasury selling. This is the time, most of the quarterly pay-outs for GST and advance tax are done for which the treasury holdings are drawn down. The month of Dec-21 saw overall outflows across all the major categories of debt funds, except the overnight funds and the dynamic bond funds, which saw inflows of Rs4,731cr and Rs1,039 respectively.
There were a large number of debt fund categories that saw outflows in Dec-21 and that was largely along expected lines. Among the specific debt fund categories, Liquid Funds saw outflows of Rs8,698cr, ultra-short duration funds saw outflows of Rs8,348cr, low duration funds saw outflows of Rs11,067 crore, money market funds saw outflows of Rs7,029cr and floater funds saw outflows of Rs6,460cr.

Among other categories, Banking &PSU funds saw outflows of Rs6,219cr, corporate bond funds Rs4,306cr and short duration funds Rs2,093cr. It was not just at the short end, but even at the long end, there were concerns that the rising bond yields in the economy on account of higher inflation and Fed hawkishness could impact returns on debt.

Equity Fund inflows double in Dec-21 boosted by NFO support

Net inflows into equity funds more than doubled month-on-month to Rs25,077cr in Dec-21. Like in November, not a single category of equity funds saw outflows in Dec-21.

Data Source: AMFI

Let us turn to the inflows into equity funds in Dec-21. The inflows were across the board. Multi-cap funds plus flex-cap funds led the way with inflows of Rs12,925cr, largely supported by NFOs from Axis, HDFC and IDFC. Among other key categories, Sector Funds saw inflows of Rs3,770cr, Large Cap funds Rs1,548cr, large & mid-cap funds Rs1,635cr, mid-cap funds Rs1,679cr, focused funds Rs1,549cr and small cap funds Rs1,053cr. Other inflows were smaller. Equity funds saw cumulative net inflows of Rs110,458cr in the 10 months since Mar-21, representing 10 consecutive months of equity fund inflows.

Hybrid funds quiet, but passive funds surge in Dec-21

Net flows into hybrid funds was tepid at Rs551 crore. The balanced advantage funds, that had driven the NFO frenzy, were still in action raising Rs.3,793cr in Dec-21, largely driven by secondary inflows. However, this was more than offset by outflows of Rs4,304cr from arbitrage funds as all treasury related funds came under pressure. Other hybrid categories saw net inflows, but were relatively much smaller.
The legendary John Bogle of Vanguard had once said that investors should stop searching for the needle in the haystack and focus on the haystack instead. He was referring to index funds and it looks like Indian investors are taking Bogle seriously. In Dec-21 the passive category saw inflows of Rs18,703cr. Index funds saw smart inflows of Rs4,504cr while Debt and other ETFs saw inflows of a hefty Rs13,551cr. The other passive categories of gold ETFs and FOFs also attracted positive flows of Rs313cr and Rs334cr respectively. The hybrid, passive and solution funds, put together, account for 25.77% of overall AUM.

SIPs above Rs11,000cr for 2 months in a row

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 Rs10,519cr and Nov-21 with Rs11,005cr. For Dec-21 SIP flows stood at Rs11,305cr. SIPs are representative of the long term commitment of mutual fund investors and is normally seen as the ticket to long term wealth creation.

In the last 2 months, SIPs have surged despite volatile markets. That manifests an encouraging reality that people are divorcing their long term financial goals from short term market volatility. That is surely a good note to end the year 2021.

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Equity, hybrid and passive flows stay robust in Jan 2022

  • India Infoline News Service
  • 11 Feb , 2022
  • 10:58 AM
The story of equity flows in the month of Jan-22 was a relatively subdued story with NFOs nowhere close to the Dec-21 levels. The NFO collections in Jan-22 at Rs3,223 crore was much lower than the Dec-21 NFO collections of Rs20,616 crore. The limited NFO flows in Jan-22 were largely passive equity and debt index funds.

The overall AUM in Jan-22 was higher at Rs38.01 trillion on a closing AUM basis. There were inflows across all major categories of mutual funds including debt funds, equity funds, hybrid funds and passive funds. The AUM has shown a steady growth over the last 1 year on a mix of robust stock market indices and strong SIP flows.

Data Source: AMFI

The AUM net inflow for Jan-22 stood at Rs35,252 crore overall with positive net inflows across all the mutual fund asset classes. The AUM mix as on 31-Jan was Income Funds (37.18%), equity funds (35.20%), hybrid funds (12.60%) and passive & solution funds (13.41%). The residual 1.61% were close-ended funds, where AUM was largely neutral for the month. This gap of 198 bps between equity fund AUM and debt fund AUM is less than in Dec-21. While debt fund share has gone down, it has been taken up by hybrids and passive funds rather than active equity funds. Overall AUM grew 24.58% yoy from Rs30.51 trillion in Jan-21 to Rs38.01 trillion in Jan-22. In Jan-22, the share of hybrid funds and passive funds showed an improvement even as equity funds and debt lost market share.

Debt funds see positive flows in Jan-22

After heavy outflows of Rs49,154 crore in Dec-21, debt funds had some consolation in the form of net inflows of Rs5,088 crore in Jan-22. The month of Jan-22 saw a mix of inflows and outflows across different categories of debt funds.

There were a large number of debt fund categories that saw outflows in Jan-22 which was not surprising considering the monetary hawkishness. Among the specific debt fund categories, Liquid Funds saw outflows of Rs14,398 crore, low duration funds saw outflows of Rs1,963 crore, short duration funds saw outflows of Rs2,889 crore, Banking & PSU funds saw outflows of Rs2,537crore and corporate bond funds saw outflows of Rs936 crore.

Among the fund categories that saw net inflows in Jan-22, Overnight funds saw inflows of Rs19,358 crore, money market funds saw inflows of Rs4,719 crore, ultra-short duration funds saw inflows of Rs2,969 crore and floater funds Rs2,592 crore. There have been some concerns at the longer duration end with Fed turning distinctly hawkish and Indian bond yields surging sharply in the last couple of months to inch closer to the 7% mark.
Equity Fund inflows halve in Jan-22 in the absence of NFO boost

Net inflows into equity funds almost halved MOM from Rs25,077crore in Dec-21 to Rs14,888 crore in Jan-22. Almost all the categories of equity funds saw net inflows in Jan-22.

During Jan-22, Multi-cap funds plus flexi-cap funds led the way with inflows of Rs3,419 crore. Among other key categories, Sector Funds saw inflows of Rs2,073 crore, Large Cap funds Rs1,890 crore, large & mid-cap funds Rs1,722 crore, mid-cap funds Rs1,770 crore, focused funds Rs1,813 crore and small cap funds Rs1,499 crore. In a reversal of trend, ELSS funds saw net inflows of Rs805 crorein Jan-22. Equity funds saw cumulative net inflows of Rs125,346 crore in the 11 months since Mar-21; the 11th consecutive month of positive equity fund inflows.

Hybrid fund inflows bounce back smartly in Jan-22 

Net flows into hybrid funds were tepid at Rs551 crore in Dec-21 but bounced back smartly to Rs12,132 crorein Jan-22. This was despite the absence of any significant NFO contribution in Jan-22. Arbitrage funds led the hybrid inflows at Rs6,138cr in Jan-22. Balanced advantage funds saw inflows of Rs2,391 crore and Aggressive Hybrid Funds Rs1,844 crore in Jan-22. Other hybrid categories were also positive, albeit on a smaller scale.
Passive flows in Jan-22 were not as robust as in Dec-21 but was positive nevertheless. In Dec-21 passive fund inflows were Rs18,703 crore compared to just Rs8,861 crore in Jan-22. Index funds saw smart inflows of Rs4,915 crore while Debt and other ETFs saw inflows of Rs4,009 crore in Jan-22. Among other passive categories, gold ETFs saw limited outflows while FOFs attracted small inflows in Jan-22. The hybrid, passive and solution funds, now, jointly account for 26.01% of overall mutual fund AUM.

SIP flows cross Rs100,000 crore in just 10 months of FY22

In Sep-21 the magic mark was crossed for the first time with net SIP flows of Rs10,351 crore. That trend was accentuated in Oct-19 with Rs10,519 crore and Nov-21 at Rs11,005 crore. For Dec-21 SIP flows stood at Rs11,305 crore while Jan-22 built on that trend to record Rs11,517 crore SIP flows. For the first time ever, SIP flows crossed the Rs1 trillion mark in the first 10 months of the fiscal year.
The moral of the flow story is two-fold. Firstly, SIPs are emerging as the veritable driver of flows into equity and quasi equity fund categories. Secondly, outside of equity and debt funds; the hybrids and passives now account for 26.01% of the overall mutual fund AUM. Clearly, alternatives have emerged as an asset class and that is an optimistic tone to start year 2022.

Equity fund flows bounce back sharply in January 2023

  • 10 Feb , 2023
  • 9:40 AM
  • For January 2023, inflows into active equity funds remained positive and surprisingly robust.

However, flows into active debt funds stayed in the negative. The redeeming feature of the month was the rebound in flows into active equity funds, which did much better in January 2023 compared to the hybrid funds and the passive fund categories too. January 2023 repeated the SIP story, touching a record level of Rs13,856 crore in the month. Secondly, new fund offerings (NFOs) were robust in January 2023 collecting Rs4,422 crore. 

The NFO flows in January 2023 were largely dominated by multi-cap funds, multi-asset allocation funds and closed ended fixed term plans (FTP). Let us quickly turn to the AUM story for January 2023. Alternate AUM includes hybrids, passives and solution funds.

Month

Debt AUM 

(Rs trillion)

Equity AUM 

(Rs trillion)

Alternate AUM 

(Rs trillion)

Overall AUM 

(Rs trillion)

Jan-22

14.13

13.38

9.89

38.01

Feb-22

14.09

12.95

9.91

37.56

Mar-22

12.99

13.65

10.31

37.57

Apr-22

13.56

13.66

10.42

38.04

May-22

13.22

13.32

10.40

37.22

Jun-22

12.34

12.86

10.20

35.64

Jul-22

12.46

14.16

10.88

37.75

Aug-22

13.03

14.78

11.26

39.34

Sep-22

12.42

14.63

11.12

38.42

Oct-22

12.45

15.22

11.58

39.50

Nov-22

12.57

15.58

11.93

40.38

Dec-22

12.42

15.25

11.92

39.89

Jan-23

12.38

15.06

11.87

39.62

Data Source AMFI

The overall AUM of the mutual fund industry as of the close of January 2023 stood at Rs39.62 trillion, slightly lower than in December 2022, due to the fall in the index during the month. Here are some major takeaways.

  • The overall AUM has been in a very narrow range for the past one year. Most of the volatility in AUM has arisen from sharp swings in the equity markets coupled with sharp swings in benchmark bond yields. 

     
  • If you compare the AUM of active equity funds and active debt funds, there has been a complete reversal of roles over last 12 months. In January 2022, active debt had an overall AUM of Rs14.13 trillion and active equity had AUM of Rs13.38 trillion. As of January 2023, overall AUM of active debt funds has fallen to Rs12.38 trillion while AUM of active equity is up to Rs15.06 trillion. It is a complete reversal of roles; partially attributed to market contribution and partially to low yields on debt.

     
  • The big takeaway is that the AUM of alternate assets has moved up from Rs9.89 trillion to Rs11.87 trillion in last one year. Active fund managers struggled to beat the index, which led to investors gravitating towards passive index funds and index ETFs. However, there are signals of a turnaround in active equity fund demand in January 2023.

Let us now turn to debt mutual fund flows for January 2023.

Debt fund flows again face pressure in January 2023

In the last one year, debt fund flows have been under pressure and have actually been negative in almost all the quarters. For the month of January 2023, debt funds saw net outflows of Rs10,316 crore. The outflows have halved over December 2022, but that must be adjusted for the treasury effect. The outflows from debt funds is quite high, despite January not being a treasury adjustment month. Active debt funds have also faced pressure of flows, at the long end of the duration curve, due to excess hawkishness of the RBI and the US Federal Reserve.

Here is a summary of debt fund flows in January 2023. The funds that saw positive inflows were limited. Money Market funds saw inflows of Rs6,460 crore and ultra-short duration funds Rs1,765 crore. Other than that, inflows into long duration funds, dynamic bond funds and 10 year Gilt Funds were quite limited. Clearly, the overall flows in active debt funds were biased towards the sell side as is evident from the large net selling number. There were signs of some buying interest in long duration bonds betting that the interest cycle in India may have topped out.

We now turn to the larger universe of debt fund categories that saw outflows in January 2023. Big selling was visible in Liquid funds Rs5,042 crore, short duration Funds Rs3,859 crore, Overnight funds Rs3,688 crore, Corporate Bond Funds Rs2,333 crore, Floater funds Rs1,438 crore, Banking & PSU Funds Rs1,173 crore. In addition, debt fund categories like low duration funds and credit risk funds also saw net outflows in January 2023. With the RBI hiking rates by another 25 bps and the Fed staying hawkish, bond yields are already under stress and could put further strain on the flows into longer duration funds.

Small fund categories boost equity fund flows in January 2023

Equity fund flows in January 2023 were sharply higher at Rs12,547 crore. The big thrust to equity flows came from Rs4,422 crore of NFO flows and Rs13,856 crore of SIP flows. Now for the equity fund inflow story! During January 2023, small cap funds led the way with Rs2,256 crore of inflows. Among other key contributors, Large and mid-cap funds collected Rs1,902 crore and mid cap funds saw inflows of Rs1,628 crore while ELSS saw inflows of Rs1,415 crore. The combination of Multi-cap funds plus flexi-cap funds saw inflows of Rs2,779 crore. Other fund categories that saw meaningful inflows include sector funds at Rs903 crore, contra funds at Rs763 crore and large cap funds at Rs716 crore. All categories of equity funds saw inflows in the month of January 2023.

One parameter that tells you the story of equity fund flows very eloquently is folio accretion. Folios are MF investor accounts and give a fairly good idea of retail spread. As of the close of January 2023, equity folios touched an all-time high of 962.07 lakh folios out of total mutual fund folios of 1,428.44 lakhs; or 67.35% share of overall folios. 

Hybrid flows in January 2023 less impressive than active flows

Hybrid fund flows saw positive flows to the tune of Rs4,492 crore in January 2023; largely because of NFO flows into Aditya Birla Sun Life multi-asset allocation fund. Even arbitrage funds showed positive flows in January 2023. However, the NFOs of the highly popular Balanced Advantage Funds (BAF) is yet to pick up and that was the only hybrid category, other than equity savings funds, to see negative flows. Multi asset allocation funds saw inflows of Rs2,182 crore, largely driven by the Aditya Birla Sun Life Multi Asset Allocation NFO. Arbitrage fund saw net inflows of Rs2,055 crore in January 2023.

Passive funds did not have a very great January 2023 as the dominance of previous months was missing. Overall, passive funds saw inflows of Rs3,955 crore as investors preferred beta over alpha. What is more interesting is the gross flows into passive funds at an impressive Rs23,604 crore. The passive surge was led by index funds at Rs5,813 crore while other ETFs saw outflows of 1,709 crore in January 2023.

What we read from the January 2023 mutual fund flows?

Here is a summation of the January 2023 fund flows in three key takeaways.

  1. Equity fund flows saw a sharp turnaround as the levels of certainty and confidence among equity investors is gradually coming back.

     
  2. The interesting data is that the debt fund with the highest AUM as of January 2023 is bond index ETFs, which stands at Rs4.87 trillion.

     
  3. The active debt fund flows continue to remain tepid and that is unlikely to change till there is ambiguity over the rate trajectory.

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  • 11 February, 2022 |
  • 6:19 AM

The story of equity flows in the month of Jan-22 was a relatively subdued story with NFOs nowhere close to the Dec-21 levels. The NFO collections in Jan-22 at Rs3,223 crore was much lower than the Dec-21 NFO collections of Rs20,616 crore.

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