Debt funds see outflows in Dec-24, but equity fund flows robust

13 Jan 2025 , 02:04 PM

DEC-24 AUM TAPERS AS EQUITY MARKETS SELL OFF

The ghost of quarterly treasury management was back to haunt debt funds in December 2024. Debt funds saw net selling of ₹(1,27,153) Crore as corporates scrambled to redeem liquid funds for advance tax dues. However, active equity funds saw robust inflows of ₹41,156 Crore, the second best monthly flow after October 2024. However, overall flows into mutual funds were still negative at ₹(80,355) Crore.

Apart from active equity funds, the other categories like passive funds and hybrid funds saw limited accretion in inflows in December 2024. Sectoral and thematic funds continued to dominate the active equity fund flows in December, thanks to the slew of NFOs, which got a tremendous response from investors. However, the sharp correction in the markets and the redemptions by active debt funds resulted in overall MF AUM tapering by -2.13% MOM.

HOW SIPS AND NFOS SHAPED UP IN DECEMBER 2024

Let us first talk about SIPs in December 2024. For the third month in a row, the gross SIP flows stayed above the ₹25,000 Crore mark. Dec-24 SIP flows at ₹26,459 Crore indicate that retail interest remains robust in equity markets. If we look back at the first 9 months of FY25, SIP flows have been well above ₹20,000 Crore; averaging ₹23,447 Crore. That is indicative of aggressive financialization of retail savings in India.

New fund offerings (NFOs) were robust in the month of December 2024 at ₹13,852 Crore across 33 NFOs; sharply higher than November. Out of these 33 NFOs, 14 NFOs were from passive funds and 13 NFOs from equity funds; with sectoral / thematic funds accounting for 12 of the 13 schemes. One quick observation is that with the rising interest in active equity funds, passive funds may have temporarily taken a back seat.

WHO DOMINATED THE ₹1 TRILLION CLUB

We now turn to our monthly update on the Trillion Rupee Club; with a look at entries and exits. The Trillion rupee club includes fund categories with over ₹1,00,000 Crore (or ₹1 Trillion) in AUM. Out of the 39 categories of open-ended funds, there are 22 open ended fund categories with AUM of over ₹1 Trillion. Out of the 16 active debt schemes, 6 categories are in the Trillion rupee club, with Overnight Funds dropping out this month due to heavy redemptions. Among equity funds, 10 out of the 11 categories are already in the ₹1 Trillion club. Index ETFs (debt plus equity) continues to be the largest single category with AUM of ₹7.65 Trillion; followed by Sectoral / Thematic funds at ₹4.73 Trillion, Liquid Funds at ₹4.64 Trillion and Flexi Cap Funds at ₹4.43 Trillion. Mid-cap funds also crossed the ₹4 Trillion mark for the first time.

FORGET DEBT FUND CYCLES, EQUITY FUND FLOWS WERE ROBUST

Here is a quick look at how monthly flows across fund categories panned out for the last 13 months. Solutions funds have been merged into hybrid funds.

Month	Debt Fund Flows (₹ Crore)	Equity Fund Flows (₹ Crore)	Hybrid Fund Flows (₹ Crore)	Passive Fund Flows (₹ Crore)	Total MF Flows (₹ Crore)
Dec-23	(75,560)	16,997	15,229	573	(40,685)
Jan-24	76,469	21,781	20,885	3,983	1,23,205
Feb-24	63,809	26,866	18,288	9,756	1,18,351
Mar-24	(1,98,299)	22,633	5,791	12,793	(1,59,387)
Apr-24	1,89,891	18,917	20,110	11,505	2,39,233
May-24	42,295	34,697	18,456	15,665	1,11,103
Jun-24	(1,07,358)	40,608	9,039	14,602	(43,109)
Jul-24	1,19,588	37,113	17,663	14,778	1,89,141
Aug-24	45,169	38,239	10,233	14,599	1,08,123
Sep-24	(1,13,834)	34,419	5,366	3,254	(71,114)
Oct-24	1,57,402	41,887	17,189	23,428	2,39,907
Nov-24	12,916	35,944	4,443	7,061	60,295
Dec-24	(1,27,153)	41,156	4,703	784	(80,355)

Data Source: AMFI (negative figures in brackets)

Here are some quick takeaways. The quarter-end effect saw debt funds witnessing net outflows of ₹(1,27,153) Crore in December 2024. Equity fund inflows crossed ₹40,000 Crore for the third time in FY25. Within the equity category, the focus was back on thematic funds; thanks to the NFO surge. However, other categories were also robust. The passive funds saw net inflows into index funds being offset by heavy redemptions in domestic equity and debt index ETFs. The net impact was almost neutral flows into passive funds.

HOW THE ₹66.93 TRILLION NET AUM ADDED UP?

As of the close of December 2024, mutual funds reported AUM of ₹66.93 Trillion. Here is the story of the AUM mix.

Month	Debt AUM (₹ Trillion)	Equity AUM (₹ Trillion)	Alternate AUM (₹ Trillion)	Total AUM (₹ Trillion)
Dec-23	12.91	21.79	15.78	50.78
Jan-24	13.77	22.50	16.17	52.74
Feb-24	14.50	23.12	16.62	54.54
Mar-24	12.62	23.49	17.02	53.40
Apr-24	14.59	24.74	17.66	57.26
May-24	15.12	25.40	18.13	58.91
Jun-24	14.13	27.68	19.08	61.16
Jul-24	15.44	29.34	19.92	64.97
Aug-24	16.00	30.09	20.35	66.70
Sep-24	14.97	31.10	20.75	67.09
Oct-24	16.64	29.89	20.46	67.26
Nov-24	16.86	30.36	20.60	68.08
Dec-24	15.67	30.58	20.41	66.93

Data Source AMFI

For December 2024, heavy redemptions saw active debt fund AUM falling to ₹15.67 Trillion compared to ₹16.86 Trillion last month. Debt fund AUM is up 21.4% on yoy basis. The AUM of equity funds increased marginally to ₹30.58 Trillion in December 2024 from ₹30.36 Trillion last month. It is still below its September peak. Equity fund AUM higher 39.9% yoy. Alternate AUM is marginally lower over MOM. Here is a look at the AUM shares of various categories of funds as of December 2024.

Month	Active Debt Funds	Active Equity Funds	Hybrid Funds	Passive Funds	Solution Funds	Close-ended Funds
Jul-24	23.77%	45.16%	13.00%	16.86%	0.80%	0.41%
Aug-24	23.98%	45.11%	13.70%	16.80%	0.80%	0.40%
Sep-24	22.32%	46.36%	13.04%	17.08%	0.80%	0.40%
Oct-24	24.74%	44.45%	12.98%	16.67%	0.78%	0.40%
Nov-24	24.76%	44.59%	12.88%	16.60%	0.77%	0.39%
Dec-24	23.42%	45.68%	13.10%	16.61%	0.79%	0.40%

If you take a 5-month perspective (December 2024 over July 2024), equity funds continue to lead, but what one can see is that the market shares of all the categories are gradually stabilizing at equilibrium levels.

ACTIVE DEBT FUNDS: QUARTER-END BLUES ARE BACK

Debt funds saw net outflows of ₹(1,27,153) Crore in December 2024. Big drivers of negative inflows were Liquid Funds ₹(66,532) Crore, Money Market Funds ₹(25,843) Crore, Overnight Funds ₹(22,348) Crore, Low Duration Funds ₹(4,311) Crore, Short Duration Funds ₹(2,581) Crore, and Ultra Short Duration Funds ₹(2,410) Crore. In terms of inflow categories, long duration funds and gilt funds saw net inflows, but they were really not significant.

ACTIVE EQUITY FUNDS: ROBUST INFLOWS AS THEMATIC FUNDS ARE BACK

In December 2024, equity funds saw robust net inflows of ₹41,156 Crore. Big drivers of inflows into equity funds were Sectoral / Thematic Funds ₹15,332 Crore, Multi-Cap / Flexi-Cap Funds ₹7,806 Crore, Mid Cap Funds ₹5,093 Crore, Small Cap funds ₹4,668 Crore, Large & Mid Cap Funds ₹3,812 Crore, large cap funds ₹2,011 Crore, and Value / Contra funds ₹1,514 Crore. None of the equity fund categories saw negative flows in December 2024.

HYBRID FLOWS AND PASSIVE FLOWS TEPID IN DECEMBER 2024

The combination of hybrid funds and solution funds got net inflows of ₹4,703 Crore in December 2024. In the hybrid category, net inflows were dominated by Multi-Asset Allocation Funds at ₹2,575 Crore and Balanced Advantage Funds (BAF) ₹1,596 Crore. Arbitrage fund and Conservative Funds saw negative flows. In the passive category; inflows were dominated by index Funds ₹4,786 Crore but Index ETFs saw net redemptions of ₹(4,558) Crore. Gold ETFs saw inflows of ₹640 Crore. The passive category flows have fallen sharply in December 2024.

In last few months, active equity funds have been holding flows in the non-debt category, while the market volatility has forced investors to put passive investing on the back-burner.