Mutual fund investors have exercised caution amid high market volatility in February.
Data released by the Association of Mutual Funds in India (Amfi) shows inflows into equity funds dropped 26 per cent to ₹29,303 crore in February, lower than ₹39,688 crore registered in January and ₹41,156 crore in December.
The sharp decline can be largely attributed to the reduced inflows in mid and small-cap funds, which saw a drop to ₹3,406 crore and ₹3,722 crore in February, compared with ₹5,147 crore and ₹5,720 crore in January, respectively.
In large-cap funds, inflows totalled ₹2,866 crore, down from ₹3,063 crore in January.
Within the equity categories, sectoral/thematic funds witnessed the highest net inflow of ₹5,711 crore, followed by flexi cap funds with ₹5,104 crore.
Gold exchange-traded funds (ETFs) saw an inflow of ₹1,980 crore against ₹3,751 crore in January. However, debt funds registered an outflow of ₹6,525 crore last month after experiencing an inflow of ₹1.28 lakh crore in January.
Overall, mutual funds attracted investments of over ₹40,000 crore in the month under review compared with a high inflow of ₹1.87 lakh crore in January. As a result, the overall assets under management of mutual funds fell to ₹64.53 lakh crore in February compared with ₹67.25 lakh crore in the preceding month.
Equities continued to see strong flows in February, but there was a shift away from small and mid-caps compared with previous months.
“Inflows into large-cap stocks remained almost intact due to valuation comfort. We observed a paradox of risk, as equity flows dropped by about 25 per cent compared with January. It’s important to remember that risk increases as markets rise and decreases when markets fall. However, investor flows often follow their own pattern,” said Anand Vardarajan, chief business officer, Tata AMC.
“Sectoral/thematic funds had been witnessing heightened activity till even a few months ago with investors flocking to these funds. However, the current volatility in the market coupled with the poor performance of some of these sectors such as defence has negatively impacted the returns on these funds.
“Such funds are suitable for those investors who understand the dynamics of specific sectors or themes and can accordingly evaluate their growth prospects and risk-taking ability effectively. For retail investors, it is advisable to have a well-diversified portfolio to shield themselves against such volatile market conditions,” said Ashwini Kumar, senior vice-president and head of market data, Icra Analytics.
SIP contribution for February stood at ₹25,999.14 crore and the number of new SIPs registered in for the month stood at 44,56,425.
“The mutual fund industry continues to demonstrate resilience. Despite market fluctuations, net inflows stood at ₹40,063 crore, reflecting investor confidence in long-term wealth creation. The decline in the overall AUM from January to February was primarily due to mark-to-market losses in equity funds. SIP contributions remained steady, highlighting the continued preference for systematic investments,” said Venkat Chalasani, chief executive, Amfi.
A total of 29 schemes were launched during the month, raising a total of ₹4,029 crore.
