Inflows into mutual funds via systematic investment plans (SIP) topped Rs 20,000 crore for the first time in April, a sign that retail investors have continued to look at mutual funds from an investment perspective. However, flows into equity funds declined 16 per cent month-on-month, amid volatile stock markets in the wake of mixed quarterly results and rise in election uncertainty.
Data released by Association of Mutual Funds of India showed SIP contribution stood at an all-time high of Rs 20,371.47 crores in April, up from Rs 19,270.96 crores in March 2024.
The number of SIP accounts was also highest ever at over 8.70 crore in April, compared with 8.39 crore in March. The SIP AUM was also at a new high of Rs 11,26,128.67 crore in April, up from Rs 10,71,665.63 crores in March.
The rise in SIP assets as well as strong inflows into debt funds led to the net assets under management of the mutual fund industry crossing Rs 57.25 lakh crore in April, up 7 per cent from Rs 53.40 lakh crore in March.
Led by liquid and money market funds, debt MFs saw inflows of over Rs 1.89 lakh crore in April. They had seen outflows of Rs 1.98 lakh crore in March, due to quarter and year ending redemptions by institutional investors.
On the other hand, equity funds saw net inflows in April drop to Rs 18,917 crore in April from Rs 22,633 crore in March.
"This can be attributed to the pre-elections phase that has resulted in increased market volatility which may have cautioned smart investors that preferred to stay away from investments," said Jean Christophe Gougeon, Director & Chief Marketing Officer, Sharekhan, by BNP Paribas.
Despite the drop in equity flows, April was the 38th month of positive equity inflows.
Interestingly, among the equity funds, it was the sectoral / thematic funds that saw the highest inflows of Rs 5,166 crore, while large cap funds saw inflows of just Rs 357 crore.
Investors also continue to pile money into smallcap as well as midcap funds. Both these categories saw inflows of Rs 2,208 crore and Rs 1,793 crore in April. Smallcap funds had seen Rs 94 crore outflows in March.
"Favorable market conditions over the last couple of years saw investors getting high returns in these segments and consequently, investors have also flocked to these categories with ever increasing flows," said Melvyn Santarita, Analyst, Morningstar Investment Research India.
The huge fund flows into sectoral / thematic funds has some experts worried at a time markets have become volatile and uncertain, and stock valuations remain high.
"Our recommendation is that diversified funds would be a better bet for the long term over sectoral/thematic funds specially when valuations are on the higher side," said Chandraprakash Padiyar, Senior Fund Manager, Tata Asset Management.