Sectoral, mid cap, small cap funds witness higher flows

Investors continued to add money to equity mutual funds in April, albeit at a slower pace, with experts anticipating the gravitation of savings to financial assets when the second Covid surge abates and localized curbs on mobility and businesses ease.

Inflows into equity schemes were at Rs 3,437 crore, much lower than the Rs 9,115 crore in March. Money also came into debt funds, with the category seeing inflows of Rs 1,00,903 crore, taking assets under management of the industry to Rs 32.42 lakh crore, higher than Rs 32.17 lakh crore as of March.

“The second wave of Covid 19 and local lockdowns have hit activity, leading to reduced inflows,” said G Pradeepkumar, CEO, Union Mutual Fund. He expects flows to increase as the pandemic is brought under control.

Among equity mutual funds, there were higher flows in sectoral, midcap and small cap funds. Themes such as IT and pharma saw some inflows as investors believed these sectors would be unaffected by the pandemic. Among the categories that saw large flows were sectoral and thematic offers, drawing Rs 1,705 crore. Midcaps drew Rs 958 crore and large & midcap saw flows of Rs 708 crore.

Index funds that help save on costs and are simple products saw inflows of Rs 1167 crore, while international funds too saw inflows of Rs 695 crore, with investors diversifying geographically. Many thematic funds have doubled investor money over the last one year. Arbitrage funds saw flows of Rs 7,245 crore as savers believe they will give higher post-tax returns compared to liquid and ultra-short-term funds.

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Dynamic asset allocation funds, which allocate to equities based on market valuations, also saw flows of Rs 1,700 crore as investors moved lump sum amounts to this category.

In the fixed income space, bulk of the money came into overnight, liquid and money market funds, as corporates put back some money. Dynamic bond funds saw outflows of Rs 2,103 crore.

“Despite experiencing high redemptions in March, debt funds have seen large inflows across categories. Retail investors, however, continue to play it safe in debt by investing in short maturity funds,” says Gautam Kalia, Head – Investment Solutions, Sharekhan by BNP Paribas

Gold ETFs saw steady inflows of Rs 680 crore as investors used the fall in gold prices to increase their allocation to the yellow metal. Also with no issue of sovereign gold bonds announced, investors could buy gold through the mutual fund route.


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