Equity fund inflows create new record of ₹40,608 Crore in June 2024

12 Jul 2024 , 10:11 AM

JUNE 2024 AGAIN BELONGED TO EQUITY FUNDS

The big story of June 2024 was that equity funds set a record in net inflows, for the second month in a row. In May 2024, equity fund flows at ₹34,697 Crore were a lifetime record. In June 2024, the score was still better with net inflows of ₹40,608 Crore. It was actually a combination of factors that brought the confidence back into markets. For instance, the new government (Modi 3.0) took oath of office in early June and that was a big boost to market sentiments. In addition, some of the data flows were really flattering.

GDP growth for FY24 had come in at 8.2% while the fiscal deficit for FY24 was just 5.6% of GDP; nearly 30 bps below the original budget estimate. In addition, the current account deficit (CAD) for the full year was just 0.7% of GDP; with India seeing a current account surplus in the fourth quarter. The surge in equity fund flows came on the back of strong expectations that the reforms process would be on track and the coalition compulsions will not have any major impact on the process. But the real big triggers in the month were SIPs and NFOs; which is what we shall take a look at now.

SIP AND NFO FLOWS TRIGGERED THE EQUITY STORY

Gross SIP flows in June 2024 were again at a record level of ₹21,262 Crore. In the first quarter of FY24, the SIP flows have been above ₹20,000 Crore in each of these months. SIP flows are an outcome of financialization of savings and the entry of the Gen-X and Gen-Z into the Indian markets. Their financial planning approach is creating a ready market for SIPs; since that has emerged as the more sure-short way for investors to meet their long-term and medium term goals. The other big positive in June 2024 was flows from new fund offerings (NFOs), which are the mutual fund equivalent of the IPOs in the primary market.

For the month of June 2024, mutual funds saw NFO flows of ₹15,227 Crore across 17 NFOs. Out of these 17 NFOs, 9 NFOs were from sectoral and thematic funds, which collected ₹12,974 Crore or approximately 85.2% of the total NFO flows in the month. Clearly, sectoral funds are attracting a lot of interest, which is normal at market highs as investors try to latch on to the hottest trend in the market. To be fair, that is not always a positive trend! Once again, active equity funds dominated the NFO story in June 2024.

WHO RULES 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 is a group of fund categories with over ₹100,000 Crore (or ₹1 Trillion) in AUM. Out of the 39 categories of open-ended funds, there are 20 open ended fund categories with AUM of over ₹1 Trillion; one more than last month. Out of the 16 active debt schemes, 5 categories are in the Trillion rupee club. This includes liquid funds, low duration funds, money market funds, corporate bond funds, and short duration funds. Corporate bond funds is the only long term category in this club. Among others; ultra short duration funds are also getting close to the Trillion Rupee Club.

What about active equity funds? A total of 10 out of the 11 equity funds had AUMs in excess of ₹1 Trillion with only dividend yield funds having an AUM of under ₹1 Trillion. Out of these 10 funds, 1 category of equity funds (Flexi-Cap Funds) has crossed the ₹4 Trillion  mark. There are 3 categories of equity funds (large cap funds, sectoral funds, mid-cap funds) having AUM of between ₹3 Trillion and ₹4 Trillion. Large & Mid-Cap funds, small cap funds and ELSS Funds have an AUM of between ₹2 Trillion and ₹3 Trillion; while multi-cap funds, value funds and focused funds have AUM between ₹1 Trillion and ₹2 Trillion. Flexi-cap funds are the largest category in terms of AUM, followed closely by sectoral / thematic funds.

What about the hybrid and passive funds? Out of the 8 funds in the hybrids / solutions category, there are 3 funds in the ₹1 Trillion club with Aggressive Hybrid Funds and Dynamic Asset Allocation Funds (BAFs) already in the ₹2 Trillion club and Arbitrage Funds with an AUM of just below ₹2 Trillion AUM mark. BAFs rule the AUM rankings, followed by Aggressive Hybrid Funds. Finally, let us turn to the passive funds category. Among passive funds AUM as of end June 2024; index funds and index ETFs are already in that category. If you look at all fund categories, across equity, debt, hybrids, and passives; it is the index ETF category, that has the highest AUM at ₹7.45 Trillion. However, this is a mix of equity and bond index ETFs.

MUTUAL FUNDS SEE OVERALL OUTFLOWS IN JUNE 2024

Here is a quick look at how the monthly flows across fund categories panned out for the last 13 months. Solutions funds are 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)
Jun-23	(14,136)	8,638	4,611	2,057	(2,022)
Jul-23	61,440	7,626	12,541	860	82,046
Aug-23	(25,873)	20,245	17,273	4,535	16,181
Sep-23	(1,01,512)	14,091	18,650	4,720	(66,192)
Oct-23	42,634	19,957	10,250	7,746	80,529
Nov-23	(4,707)	15,536	13,723	2,234	25,616
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)

Data Source: AMFI (negative figures in brackets)

Here are some quick takeaways. Debt funds saw net outflows of ₹1.07 Trillion in June 2024, after 2 months of consecutive inflows. This is largely on account of the quarter end advance tax payout pressures. Equity fund inflows touched a lifetime record in of ₹40,608 Crore in June 2024, largely driven by sectoral / thematic funds; which dominated the NFO scene in the month. In last one year, the big story has been the emergence of hybrid funds as a smart asset allocation option. While hybrid flows have tapered compared to the previous two months, passive fund have showed steady flows in the latest quarter.

CHARTING THE AUM MIX PROGRESSION IN JUNE 2024

The month of March 2024 had seen a sharp fall in net AUM to ₹53.40 Trillion, which bounced back to ₹57.26 Trillion in April 2024. In May 2024, the net AUM has bounced further to ₹58.91 Trillion. If you compare the overall mutual fund AUM on a yoy basis i.e. May 2024 over May 2023, then the mutual fund AUM is sharply up by 37.58%. In April 2024, the surge in debt fund flows and the equity appreciation played a positive part in overall AUM accretion.

Month	Debt AUM (₹ Trillion)	Equity AUM (₹ Trillion)	Alternate AUM (₹ Trillion)	Total AUM (₹ Trillion)
Jun-23	13.48	17.43	13.22	44.39
Jul-23	14.17	18.25	13.69	46.38
Aug-23	14.00	18.60	13.74	46.64
Sep-23	13.05	19.08	14.17	46.58
Oct-23	13.54	18.79	14.10	46.72
Nov-23	13.58	20.33	14.87	49.05
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

Data Source AMFI

For June 2024, debt fund AUM fell to ₹14.13 Trillion compared to ₹15.12 Trillion at the close of May 2024. This was on account of the treasury redemptions in June 2024. Debt fund AUM is still up 4.82% over June 2023. For June 2024, equity fund AUM edged up to record levels of ₹27.68 Trillion; a yoy growth in AUM of 58.81%. That is not surprising with the Nifty and Sensex at lifetime highs. Alternate assets saw AUM grow by 44.33% yoy; across hybrids, solutions funds, and passive fund AUM. Here are the AUM shares for the last 6 months

Month	Active Debt Funds	Active Equity Funds	Hybrid Funds	Passive Funds	Solution Funds	Close-ended Funds
Jan-24	26.10%	42.67%	13.09%	16.75%	0.82%	0.56%
Feb-24	26.58%	42.40%	13.02%	16.65%	0.80%	0.54%
Mar-24	23.64%	43.99%	13.53%	17.50%	0.83%	0.51%
Apr-24	25.48%	43.21%	13.23%	16.81%	0.80%	0.46%
May-24	25.67%	43.11%	13.28%	16.70%	0.80%	0.44%
Jun-24	23.11%	45.26%	13.24%	17.14%	0.82%	0.43%

If you take a 5-month perspective (June 2024 over January 2024), share of active equity fund AUM is up 259 bps, share of passive funds is up 39 bps, and share of hybrid funds is up 15 bps. This has been offset by active debt fund market share contracting sharply by 299 bps over January 2024. While solution funds were flat, close-ended funds have seen AUM share contract by 13 bps to a mere 0.43%. The trend was broadly the same even on MOM basis.

ACTIVE DEBT FUNDS: TREASURY REDEMPTION PAIN IS BACK

Debt funds saw net outflows of (₹1,07,358 Crore) in June 2024, as the quarter-end treasury selling came back to haunt debt funds. Outflows dominated the debt fund flows across categories in June 2024. Among the big outflows in June 2024 in debt funds were; Liquid funds (₹80,354 Crore), Overnight Funds (₹25,143 Crore), Corporate Bond Funds (₹3,470 Crore), Banking & PSU Funds (₹2,822 Crore), and ultra short duration funds (₹2,327 Crore). Other funds with negative flows were not too material.

Among the debt fund categories that saw net inflows in June 2024 were Money Market Funds at ₹9,590 Crore and Low Duration Funds ₹2,199 Crore. There were a few other funds also with positive inflows in the debt funds category, but there were not too material. Not surprisingly, it was treasury fund that again dominated the outflows, as has been the case even in the past with respect to the quarterly treasury outflows.

ACTIVE EQUITY FUNDS: ANOTHER RECORD IN JUNE 2024

For the month of June 2024, equity funds again saw record net inflows of ₹40,608 Crore, a good 17.04% higher than the net inflows into equity funds in May 2024. Last month, we had seen the 3-month trend of progressively lower net equity fund flows being arrested. This month has marked the consolidation of this uptrend. Sectoral / Thematic funds dominated inflows at ₹22,352 Crore; largely led by the NFOs, where sectoral fund NFOs accounted for 85% of all NFOs in June 2024. The other fund categories that saw net inflows in June 2024 include; flexi cap/ multi-cap funds ₹7,767 Crore, Large & Mid Cap funds ₹2,912 Crore, mid cap funds ₹2,528Crore, small cap funds ₹2,263 Crore, and value funds ₹2,027 Crore. For the second month in a row, equity funds set an all-time record for inflows. It is rather surprising, but investors appear to be looking for alpha in sectoral funds. It is probably the low-hanging fruit for the retail investors where they ride the trend and avoid the FOMO syndrome.

HYBRID FLOWS WEAKEN; PASSIVE FLOWS STABLE

The combination of hybrid funds and solution funds got net inflows of ₹9039 Crore, nearly half the net inflows in May 2024. In the hybrid category, net inflows into arbitrage funds dominated at ₹3,837 Crore as it is emerging as an alternative to liquid funds. What about other categories? Multi-asset allocation funds saw net inflows of ₹3,453 Crore, equity savings funds saw net inflows of ₹1,003 Crore and dynamic asset allocation funds (BAFs) ₹644 Crore. Multi asset allocation funds, BAFs and equity savings funds are more of a bet on the asset allocation approach to mutual fund investing. This kind of asset allocation based on rules; not only offer better diversification; but also offers better risk-adjusted returns.

Passive funds had a relatively strong month in June 2024 with net inflows steady to ₹14,602 Crore; marginally lower than last month. This was driven by inflows of ₹9,134 Crore into Index ETFs, and ₹5,072 Crore into index funds. Flows into gold funds were positive while the flows into international fund of funds (FOFs) were negative, largely on account of regulatory restrictions. Passive flows have picked up ground in the last three months.

THREE INSIGHTS FROM THE AMFI DATA

There were 3 insights we gathered from the mutual fund flows data for June 2024. Firstly, the search of a good narrative continues in debt funds; and that should hopefully come after the next monetary policy. Secondly, equity funds are attracting alpha interest through sectoral and thematic funds at market peaks. Finally, investors are selecting hybrid funds for asset allocation; which is a good sign. That could be the next big trend to watch out for!