Here is a quick look at the AUM-cum-NFO chart as of Aug-21.
The AUM accretion in Aug-21 was substantially driven by NFO flows of Rs23,668cr in Aug-21. The AUM composition as on 31-Aug was Income Funds (40.30%), equity funds (33.70%), hybrid funds (11.97%) and passive and solution funds (12.03%). The residual 2.01% were close-ended funds, where AUM fell sharply in Aug-21 due to Rs6,480cr redemptions from FTPs and Rs610cr from equity plans. Overall AUM grew 33.10% from Rs27.49 trillion to Rs36.59 trillion year-on-year. Equity and hybrid funds gained AUM share in August at the cost of debt funds. Needless to say, closed ended funds have been consistently losing their charm for Indian investors for some time now.
Debt funds see tepid inflows in Aug-21 on yield spike concerns
The concerns over a yield spike were obvious in the light of the Fed hinting at a taper by year end. That explains why there has been a massive shift to floaters in the month of August. After aggressive inflows in Jun-21, the month of Aug-21 was relatively more subdued with net inflows of just Rs1,074cr. First the outflows! Overnight funds saw outflows of Rs11,808cr, and low duration funds Rs7,408cr in Aug-21.
There were a number of debt fund categories that saw sharp inflows in Aug-21. Among the specific debt fund categories, Floater Funds saw inflows of Rs9,991cr while corporate bond funds saw inflows of Rs3,065cr. Other key categories of debt funds that saw meaningful inflows include, money market funds at Rs2,048cr, ultra-short-duration funds Rs1,890cr, medium to long-duration funds at Rs1,226cr and Banking & PSU funds at Rs1,021cr. Floater demand is hinting at clear yield hardening expectations among institutional treasuries.
Equity Fund inflows were lower in Aug-21 on limited NFO support
Net inflows into equity funds in Aug-21 at Rs8,667cr was sharply lower than the Jul-21 inflow figure of Rs22,584cr. But Jul-21 flows came from the massive ICICI Pru Flexi Cap NFO. In comparison, the Nippon Flexi Cap NFO was much smaller in August. However, the net inflow may be still lower if you consider the Rs610cr outflows from close-ended equity funds. Big inflows in Aug-21 came from Flexi-cap funds Rs4,741cr and Focused Funds Rs3073cr. Both flows came largely from NFOs. Sectoral fund attracted Rs1,885cr in Aug-21.
Let us turn to the outflows from equity funds. In a robust month, very few categories of equity funds saw outflows and these were also very small. For example, ELSS funds saw outflows of Rs778cr and Value/Contra funds saw outflows of Rs613cr. One can argue that the equity fund inflows were largely driven by the spate of NFOs, but that is good news for mutual funds. Overall, equity funds have seen cumulative net inflows of Rs59,874cr in the 6 months since Mar-21.
Aug-21 belonged to Dynamic Hybrid Funds and the SBI MF NFO
Hybrid funds continued to build heft with net inflows of Rs18,706cr in Aug-21. Dynamic funds saw record net inflows of Rs16,571cr, and this was predominantly driven by the SBI MF Balanced Advantage Fund that collected over Rs14,500cr in its IPO. After hectic flows in July, arbitrage fund inflows were relatively more subdued at Rs1,793cr in Aug-21. Balanced Advantaged Funds appear to have emerged as an option in peak markets.
If hybrid funds are catching up fast, passive funds are not too far behind. Debt ETFs saw inflows of Rs8,548cr while index funds saw inflows of Rs1,934cr and International FOFs saw net inflows of Rs1,085cr. Interestingly, the combined AUM of hybrid funds and passive funds has now crossed Rs9.50 trillion and has emerged as the third alternative MF asset class.
SIPs finally get a stone’s throw from the Rs10,000cr mark
A couple of months back, we had written that the next target would be for monthly SIPs to scale to Rs10,000cr per month. In Aug-21 we almost got there with Systematic investment plans (SIPs) accounting for net inflows at Rs9,923cr. SIPs already account for over 40% of the total equity fund AUM. During the month of June, SIP folios crossed the 4.30cr mark for the first time, and at the current pace, a target of 5cr SIP folios by Mar-22 looks very realistic. With the growing number of SIP folios and SIP AUM, it looks like systematic investing as an approach to financial goal planning has finally arrived in India.