Equity fund inflows touch record ₹34,697 Crore in May 2024

11 Jun 2024 , 08:44 AM

MAY 2024 BELONGED TO THE EQUITY FUNDS

The big story of May 2024 in terms of mutual fund flows was the record inflows into equity mutual funds. At ₹34,697 Crore, the net inflows into equity funds set an all-time record. The surge in equity fund buying came on the back of strong expectations that the ruling NDA would again get a majority. Eventually, the NDA majority may not have been flattering, but they formed the government for the third term. For the Financial markets it is back to business usual. But what was it that drove these massive flows into equity funds in May 2024. Of course, SIPs were a key factor, but the month was also about NFOs.

Out of the total inflows of ₹34,697 Crore into equity funds, sectoral / thematic funds alone accounted for ₹19,213 Crore or 55.4%of the total net flows into equity funds. Within the sector funds category, the thematic HDFC Manufacturing Fund NFO alone accounted for net inflows of ₹9,563 Crore in May 2024. In fact, the NFO of HDFC Manufacturing Fund alone accounted for 94% of all flows into new fund offerings (NFOs) in the month of May 2024. However, if you look at the overall sector fund flows, the HDFC Manufacturing Fund only accounts for half, with balance coming from secondary flows. As of the close of May 2024, net MF AUM stood at a record level of ₹58.91 Trillion; 2.88% higher on MOM basis.

NET MF INFLOWS IN MAY 2024 WERE ACTUALLY BROAD-BASED

However, net inflows into mutual funds were not just about equity funds, but it was more of a broad-based story. Here are some key points to note in terms of overall flows other than into equity funds.

• The overall net inflows into mutual funds across all categories of funds in May 2024 stood at ₹1,10,517 Crore. This includes the flows into open ended funds and into closed ended funds in the month of May 2024.
• Let us turn to debt funds. The net inflows were nowhere close to the ₹1.90 Trillion of net inflows that we saw in April. However, the May 2024 inflows into debt were still robust at ₹42,295 Crore, largely led by liquid funds and others at the short end of the curve.
• Hybrid funds was another category that saw robust net inflows of ₹17,991 Crore in May 2024, largely led by inflows into arbitrage funds, as a liquid fund alternative. However, allocation funds like multi-asset allocation funds and BAFs also saw buying interest.
• After a long gap, the passive funds also saw buying interest in a market that was gradually getting obsessed with alpha. Passive funds saw net inflows of ₹15,665 Crore in May 2024, with index funds and index ETFs leading the charge.

To complete the virtuous circle, the gross SIP flows into mutual funds in May 2024 touched another all-time high of ₹20,904 Crore, compared to ₹20,371 Crore in April 2024.

WHO RULES THE ₹1 TRILLION CLUB

We now turn to our monthly update on the Trillion Rupee Club. 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 19 open ended fund categories with AUM of over ₹1 Trillion; the same as last month. Out of the 16 active debt schemes, 4 categories are in the Trillion rupee club. This includes liquid funds, money market funds, corporate bond funds, and short duration funds. Corporate bond funds remain the only long term category in this club. Among others; overnight funds, ultra short duration funds and low 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, 4 categories of equity funds (large cap funds, sectoral funds, mid-cap funds, and flexi-cap funds are already having AUM of above ₹3 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. Dividend yield fund is the only category in equity funds, with AUM under ₹1 Trillion.

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 getting close to the ₹2 Trillion AUM mark. In the passive funds category; 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 ₹6.97 Trillion.

OVERALL MONTHLY FLOWS AT ₹1.11 TRILLION IN MAY 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)
May-23	45,959	3,240	6,193	4,487	57,420
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

Data Source: AMFI (negative figures in brackets)

Here are some quick takeaways. Debt funds saw net inflows for second month in a row, but these flows gravitated towards the short end of the yield curve. Equity fund inflows touched a lifetime record in May 2024, largely driven by sectoral / thematic funds. In last one year, the big story has been the emergence of hybrid funds as a smart asset allocation option.

HOW OVERALL AUM MIX EVOLVED IN MAY 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)
May-23	13.49	16.57	12.85	43.20
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

Data Source AMFI

For May 2024, debt fund AUM surged to ₹15.12 Trillion compared to ₹14.59 Trillion at the close of April. This is the highest level of debt fund AUM in the last one year. Debt fund AUM is up 12.08% over May 2023. For May 2024, equity fund AUM edged up to ₹25.40 Trillion; a yoy growth in AUM of 53.29%. That is not surprising with the Nifty and Sensex at lifetime highs. Alternate assets saw AUM grow by 41.09% yoy; across hybrid and passive AUM. Here are the AUM shares for the last 5 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%

If you take a 4-month perspective (May 2024 over January 2024), share of active equity fund AUM is up 44 bps, and share of hybrid funds is up 19 bps. This has been offset by active debt fund market share contracting by 43 bps over January 2024, passive funds down 5 bps, and close-ended funds contracting by 12 bps. However, on a MOM basis, debt funds and the hybrid funds saw accretion in AUM, while other categories saw AUM share tapering.

ACTIVE DEBT FUNDS: NOT GREAT, BUT GOOD NEVERTHELESS

Debt funds saw robust net inflows of ₹42,295 Crore in May 2024, continuing the optimism of April 2024. Outflows were tepid and some of the categories of debt funds that saw outflows in May 2024 included floater funds (₹546 Crore), credit risk funds (₹540 Crore), and medium duration funds (₹539 Crore). Other funds with negative flows were not too material. The bulk of the focus was on debt fund inflows in May 2024.

Among the debt fund categories that saw massive inflows in May 2024 were Liquid Funds at ₹25,873 Crore, money market funds at ₹8,272 Crore, overnight funds at ₹6,645 Crore, ultra short duration funds at ₹1,647 Crore, and corporate bond funds ₹687 Crore. Other categories of debt funds that saw net inflows in May 2024, were relatively smaller in size. The net inflows into debt funds in May 2024, were less than one-fourth of April net inflows.

ACTIVE EQUITY FUNDS: MAY 2024 MARKED AN ALL-TIME RECORD

For the month of May 2024, equity funds saw record net inflows of ₹34,697 Crore, a good 83% higher than the net inflows into equity funds in April 2024. It also arrests the 3 month trend of progressively lower net equity fund flows. Sectoral / Thematic funds dominated inflows at ₹19,213 Crore; largely led by the NFO of HDFC Manufacturing Fund, which garnered ₹9,563 Crore. The other fund categories that saw net inflows in May 2024 include; flexi cap/ multi-cap funds ₹5,800 Crore, small cap funds ₹2,725 Crore, mid cap funds ₹2,606 Crore, large & mid-cap funds ₹2,397 Crore, and value funds ₹1,404 Crore. Remember, this is an all-time record in terms of monthly equity fund flows. Also, the relative caution on small cap funds and mid-cap funds has given way to renewed interest in these fund categories.

HYBRID DOES GOOD; PASSIVE FLOWS DO BETTER

The combination of hybrid funds and solution funds got net inflows of ₹18,456 Crore, around 10% lower than in April 2024. In the hybrid category, net inflows into arbitrage funds dominated at ₹12,758 Crore as it is emerging as an alternative to liquid funds. Among others; multi-asset allocation funds saw net inflows of ₹3,161 Crore, dynamic asset allocation funds (BAFs) at ₹1,279 Crore, and equity savings funds saw net inflows of ₹849 Crore. Multi asset allocation funds, BAFs and equity savings funds are more of a bet on the asset allocation theme to mutual fund investing. This kind of asset allocation based on rules has been seen to offer better diversification and better risk-adjusted returns.

Passive funds had a relatively strong month in May 2024 with net inflows bouncing to ₹15,655 Crore; higher than last month. This was driven by inflows of ₹10,690 Crore into Index ETFs, and ₹4,490 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 reasons. Passive flows have been generally tepid since the start of calendar 2023.

WHAT WE READ FROM THE AMFI MF FLOWS REPORT FOR MAY 2024

There were 3 insights we gathered from the mutual fund flows data for May 2024. Firstly, the debt funds have been robust in the last 2 months, but it is still too treasury dependent and too focused at the short end of the yield curve. Secondly, equity funds are attracting alpha interest despite the elevated levels of the Nifty and Sensex. Finally, the big story is the preference shown by mutual fund investors for the asset allocation funds like multi-asset allocation funds, BAFs and equity savings funds. Clearly, that could be the next big trend to watch out for!