India’s mutual funds saw net inflows of Rs 45,999 crore in April, compared with outflows of Rs 2.12 lakh crore in March, as a rebound in flows in liquid funds offset redemptions in several other categories. The net assets under management of the mutual fund industry stood at Rs 23.93 lakh crore at the end of April, compared with Rs 22.26 lakh crore in March, up 7.50 per cent.
In March, debt mutual funds had seen outflows of nearly Rs 1.95 lakh crore, with Rs 1.10 lakh crore outflows from liquid funds alone. Typically at the end of every quarter, corporates redeem their money marked in liquid funds to make advance tax and other payments. In April, debt fund inflows stood at Rs 43,431 crore.
Liquid funds are generally considered safe as they invest in securities with a maturity of up to 91 days. These funds saw inflows of Rs 68,848 crore in April. Overnight funds, which invest in securities maturing in one day, corporate bond funds and Gilt funds (government bonds) also saw good inflows last month.
However, credit risk funds continued to see redemption pressures, with investors pulling out Rs 19,239 crore in April. Credit Risk funds typically invest a large chunk of their money into bonds, debentures and commercial papers that have low rating (AA+ or below). Investors started losing appetite in these funds after the defaults at IL&FS in late 2018. Redemption pressures increased after Franklin Templeton AMC decided to wind down six of its schemes last month.
Worried over the Franklin Templeton issue, investors pulled out money from several other debt fund categories, too. For instance, low duration funds and medium duration funds saw outflows of more than Rs 6,000 crore each last month. Ultra short duration funds also saw net outflows of Rs 3,419 crore.
After the Franklin Templeton issue, Reserve Bank of India had stepped in with a special liquidity facility of Rs 50,000 crore, which could be used by banks exclusively to meet liquidity requirements of mutual funds. Since it was launched, there has been a substantial slowdown in redemptions, said N.S. Venkatesh, chief executive of AMFI.
“The redemptions have slowed down substantially; markets have reached a sense of stability there. Going forward, we see confidence come back to the market and whatever redemptions will happen, will be normal redemptions, no extraordinary redemptions will happen,” he said.
Meanwhile, investors continued to pour money into equity mutual funds. However, the net inflows fell 47 per cent last month to around Rs 6,213 crore, compared with Rs 11,722 crore inflows in March. Hybrid schemes also saw inflows of Rs 4,204 crore, mainly on the back of Rs 6,587 crore inflows in arbitrage funds. In March, arbitrage funds had seen outflows of Rs 33,767 crore.
Notably, despite the overall inflows into equity funds falling sharply, contributions via systematic investment plans sustained over Rs 8,000 crore per month mark in April. Investors pumped in Rs 8,376 crore via SIPs in April versus Rs 8,641 crore in March. The number of SIP accounts actually rose to 3.13 crore from 3.11 crore.
“It is heartening to note that despite subdued economic scenario, retail investors are seen to be continuing with their goal-based investment discipline,” said Venkatesh.
He doesn’t see any panic among retail equity fund investors and expects SIP flows to rebound and rise over the March figures by May-June.