Inflows of equity MFs fall by nearly 47 per cent in April
According to the monthly report of Association of Mutual Funds in India (AMFI), equity mutual funds registered a net inflow of Rs 6,212.96 crore in April 2020, which is a decline of 47 per cent as compared to March 2020. This stopped the three-month gaining streak.
The decline was witnessed even after the markets had recovered close to 15 per cent in the previous month. Such a rise in a month was highest since May 2009. On year-to-date (YTD) basis, markets have fallen close to 23 per cent.
Despite such a depressed economic situation, people are following the disciplined approach towards investing, as we can see that systematic investment plans (SIP) have maintained its stance above Rs 8,000 crore. This shows that people are following more disciplined approach by doing goal-based investing. However, on the other hand, it seems that the inflows declined mainly due to the reduced activity of mutual fund distributors amid lockdown.
Moreover, despite the fall in inflows, equity funds continue to get positive flows due to SIP flows. This shows that people are now much aware about equity investments and are not redeeming their funds in panic. Rather, they are adding investments in a staggered manner via SIP. Having said that, contribution in SIP fell by 3.07 per cent as compared to March 2020 but still was successful to stay above Rs 8,000 crore mark in 17 straight months.
Despite major outflows witnessed in arbitrage funds in March 2020, in the month of April 2020, it seems like it is gaming traction again as a short-term investment. This is due to its low-risk and tax efficiency traits.
At an industry level, we saw a net inflow of Rs 45,999.48 crore in the month of April 2020 as against the net outflow of Rs 2.13 lakh crore in the previous month. It was despite the sudden redemptions that we have witnessed from six Franklin funds.
Liquid funds witnessed a net inflow of Rs 68,848 crore, compared to the net outflow of Rs 1,10,037 crore in the previous month. This bounce in the inflows might be due to the reversal of financial year-end outflows. Liquid funds are usually used by corporates to park cash for short-term.