Mutual Fund Inflows Drop in February as Equity AUM Falls

Inflows into India’s equity mutual funds dropped to a 10-month low in February, as investors shifted towards safer options. The decline came amid a bearish phase for smallcap and midcap stocks.

According to data from the Association of Mutual Funds in India, total inflows fell by 26% compared to the previous month, marking the sharpest decline since April 2023. The total investments stood at around ₹293 billion ($3.4 billion).

Largecap funds saw a relatively smaller drop of 6%, with inflows reaching ₹29 billion. However, smallcap and midcap funds witnessed significant declines, with investments falling by 34% and 36% to ₹37 billion and ₹34 billion, respectively.

India’s mutual fund industry witnessed a significant decline in inflows during February, with total inflows dropping to Rs 40,063 crore, compared to Rs 1,83,551 crore in January, as per data from the Association of Mutual Funds in India (AMFI). The overall Assets Under Management (AUM) also shrank to Rs 64.5 lakh crore from Rs 67.3 lakh crore in the previous month.

Equity Mutual Funds See Lower Inflows

Equity mutual funds recorded inflows of Rs 29,303 crore in February, marking a 26.1% decline from the Rs 39,688 crore inflow seen in January. The equity AUM also dipped by around 7%, settling at Rs 27.4 lakh crore, down from Rs 29.5 lakh crore in the previous month.

Actively Managed Equity Funds

Large-cap funds saw inflows of Rs 2,866 crore, lower than Rs 3,063 crore in January.

Mid-cap funds recorded an inflow of Rs 3,406 crore, compared to Rs 5,147 crore in the prior month.

Small-cap funds attracted Rs 3,722 crore, significantly lower than Rs 5,721 crore in January.

Flexi-cap funds saw Rs 5,104 crore in inflows, down from Rs 5,697 crore in the previous month.

Sectoral and thematic funds experienced a sharp drop, recording Rs 5,711 crore in inflows, compared to Rs 9,016 crore in January.

Debt Funds Face Heavy Outflows

Debt mutual funds witnessed a net outflow of Rs 6,525 crore in February, a significant reversal from the massive Rs 1.28 lakh crore inflow in January.

Overnight funds recorded Rs 2,263 crore in outflows, compared to an inflow of Rs 18,936 crore in the previous month.

Liquid funds saw inflows of Rs 4,976 crore, down sharply from Rs 91,592 crore in January.

Hybrid and Passive Funds

Hybrid funds recorded inflows of Rs 6,803 crore, a 22% decline from Rs 8,767 crore in January.

Arbitrage funds led the category with Rs 3,592 crore in inflows.

Passive funds saw inflows of Rs 10,248 crore, almost unchanged from Rs 10,255 crore in January, with index funds being the most popular category.

New Fund Offerings (NFOs)

New fund offerings (NFOs) contributed Rs 3,957 crore to inflows in February, down from Rs 4,544 crore in January. A total of 28 new funds were launched, of which eight were actively managed equity funds. The sectoral category saw the most NFO launches, with seven new funds introduced.

Conclusion

The mutual fund industry experienced a slowdown in February, with lower inflows across equity, hybrid, and passive funds, along with major outflows from debt funds. While investor sentiment remains strong in some categories like index funds and arbitrage funds, the overall dip in inflows suggests a cautious approach amid market uncertainties.