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MF investors load up on equity mutual funds in March, dump bond funds

Equity mutual funds have closed the financial year 2022-2023 on a mixed note. Equity schemes of Indian mutual funds saw net inflows of Rs 28,463 crore in March 2022 compared to net inflows of Rs 19,705 crore in the previous month. The overall assets under management remained almost flat at Rs 37.56 lakh crore as on March 31, 2022, due to outflows from bond funds.

Systematic investment plan (SIP) has been a preferred means for investing in mutual funds especially in equity funds for most individual investors. SIP contribution for the month of March 2022 was recorded at Rs 12,327 crore compared to Rs 11,438 crore in the previous month. The number of SIP accounts has gone up to 5.27 crore in March 2022 compared to 5.17 crore in February 2022.

Index funds have seen net inflows of Rs 12,313 crore in March 2022 compared to net inflows of Rs 5,747 crore in the previous month. All open-ended equity scheme categories have seen net inflows in March 2022. A large chunk of money however came through new fund offers (NFO) in March 2022. NFO of SBI Multi-cap Fund raised Rs 8,170 crore. Multi-cap funds as a category saw net inflows of Rs 9,694 crore in March compared to Rs 585 crore in February 2022.

Equity markets remained volatile on account of the Russia-Ukraine war and the expectation of an economic slowdown globally. Equity mutual fund investors however continued to invest in stocks through equity mutual funds.

The mutual fund industry has seen net outflows from debt funds of Rs 1.14 lakh crore in March 2022 compared to net outflows of Rs 8,274 crore. Part of this selling pressure is on account of financial year ending wherein many corporate entities pull out money to pay off their liabilities and spruce up balance sheets. Liquid funds and overnight funds have seen net outflows of Rs 44,603 crore and Rs 12,852 crore respectively. Many corporate entities park their short term surplus money into liquid and overnight funds.

The expectation of rise in interest rates and current low yields have driven away many fixed-income investors. Corporate bond funds, banking and PSU debt funds and short duration funds have recorded net outflows of Rs 11,967 crore, Rs 7,997 crore and Rs 9,054 crore respectively. Many individual investors prefer to invest through these categories of bond funds. All bond fund categories have seen net outflows in March 2022.

Fund of funds investing overseas saw net outflows of Rs 20 crore in March 2022 compared to net inflows of Rs 230 crore in the previous month. AMFI has asked mutual funds to stop inflows into schemes investing overseas from February 1, 2022.

Among hybrid funds arbitrage funds saw net outflows of Rs 6,796 crore compared to net outflows of Rs 335 crore. The exit from arbitrage schemes is attributed to expected increase in volatility in stock markets. Net inflows in balanced advantage funds went down to Rs 1,719 crore in March 2022 compared to net inflows of Rs 2,117 crore in the previous month.

“Investors should not chase returns. Even if they are keen to invest in equity a more measured approach should be taken. Hybrid schemes especially balanced advantage funds should work better in current times for most investors,” says Anup Bhaiya, Founder and Managing Director, Money Honey Financial Services.

A spike in gold prices on account of safe-haven demand may have attracted some investors to the gold exchange-traded funds (ETF). Gold ETFs have seen net inflows of Rs 205 crore compared to net outflows of Rs 248 crore in the previous month. As the interest rates are expected to go up soon, the investors are advised to learn to live with volatility. Investments in equities should be done in a staggered manner.


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