Mutual fund market tells a different story in 2023 than stocks so far: Here’s how

As per latest AMFI data, net inflow mutual funds stood at 9,575.17 crore in February 2023 — however less than the inflow of 11,373.21 crore in the month of January — but still this market has a positive track record of inflows for the last five consecutive months.

The last time in September 2022 such a boom was recorded in the mutual fund market. 41,404.30 crores.

Equity Mutual Funds are one of the most preferred investment vehicles for investors in this volatile market scenario. In February, there was inflow into equity-oriented mutual fund schemes 15,685.57 crores. Healthy net inflows into equity MFs have lifted the overall mutual fund market.

FYERS Head of Research Gopal Kavalireddy said, Among equity funds, thematic/sectoral funds stood out with the highest inflows in 4 months at Rs 3856 crore, followed by small-cap funds ( 2,246 Crore) and Multi-Cap Fund ( 1,977 crore). Excluding Dividend Yield Fund ( 48 crores), concentrated funds ( 240 Crore), and Large-Cap Fund ( 354 crore), the remaining eight categories saw more than net inflows 700 crores each. Index funds continue to gain investor allocation with total inflows 6,244 crores.

Moreover, hybrid schemes registered net inflows 460.32 crore, while solution-oriented schemes posted an inflow of 169.44 cr. The second best performing schemes after equity MFs would be index funds which include, gold etf, other ETFs and Fund of Funds investing overseas. These other schemes contributed to the flow of 6,488.18 crore in the overall market in February 2023.

However, debt-oriented mutual funds saw a decline 13,815.23 crore in terms of inflows during February.

Viraj Gandhi, CEO, SAMCO Mutual Fund, said, “Range-bound market, high-interest rates, weak investor sentiment are the current mood of the market but still healthy flow towards equity linked schemes suggest a strong tilt towards equity rather than debt Gives- oriented schemes in the last 3 months”.

Further, on debt MFs, FYERS’ Kavalireddy said, with interest rates expected to move from current levels, debt funds continue to witness as investors churn their allocation between short and long term funds. Liquid fund outflow was the highest at Rs 11,304 crore, followed by ultra short duration funds at Rs 2430 crore and low duration funds at Rs 1904 crore. With inflation high after a two-month cooldown, reserve Bank of India It is wary of the evolving situation and may opt to raise rates in the upcoming policy meetings. As the US Federal Reserve vowed to hike interest rates for a longer period of time to reduce inflation, the terminal interest rate could reach 6 percent, leading to further flight of capital from markets outside the US.

Overall, the Net Assets Under Management (AUM) stood at 39,46,256.95 crore by February 2023.

Kavalireddy said, for the financial year 2022-23, the AUM has increased by only 5 percent. On a year-to-date basis, Nifty 50 is down 3.93 per cent, Nifty Junior is down 10 per cent and Nifty Bank is down 5.8 per cent. The portfolios of many mutual funds are dominated by banking and large-cap companies, with returns falling over the past few quarters. However, in the face of volatility in the stock markets arising out of FII outflows, investors continue to invest in a disciplined manner. SIP contribution has been above average since October 2022 13,000 crore mark every month.

Similarly, Jeevan Kumar KC, Head of Investment Advisory at Geojit Financial Services, said, “It is visible that the Indian equity market is showing some sluggishness from the beginning of 2023. On the first trading day of the year i.e. 2nd of January, the BSE The Sensex closed at 61167 points, later it reached 59549 on the last trading day of the same month. This trend continued in February as well and the market closed at 58962 on the last trading day of the month. During the first 2 months of the year Overall down 2205 points.”

But in the case of MFs, Kumar said, unlike the equity market, the mutual fund industry tells a different story. AMFI has released the industry data for the month of February. Although the market remains volatile, but retail investors seem to be more attracted towards mutual funds.

Kumar highlighted that the net inflow towards equity schemes was Rs. 15685 Crores which is Rs.3139 Crores more than January 2023. SIP, the most preferred and popular investment method, had monthly inflows of Rs 13685 crore for February. This is for the 5th month in a row SIP Maintains monthly flow beyond its limits 13,000 crores. Small cap valuations have reached attractive levels and this is reflected in better share flow 2,246 crore in the segment.

Explaining the decline in Sensex and Nifty 50 during the month of February, Kavita Krishnan, Senior Analyst-Manager Research, Morningstar India, said, “February was an interesting month as there were reports of rate hikes, high inflation, geopolitical tensions, Markets corrected on concerns over US and signs of a global slowdown. A weaker rupee also put additional pressure, leading to losses in the indices. Volatility in Adani’s share prices also impacted the indices of which it is a constituent. A look at the indices shows that all of them ended the month in the red, with metal indices declining.”

Furthermore, Krishnan said, “Despite this fall in the markets, investors are taking informed decisions, which shows their overall preference for investing in the fall. Domestic investors have maintained confidence in the market, as broad Economic indicators remain favorable towards the market.India’s growth story This is despite the FII selling that we have seen in the market in the last one month.

Geojit K Kumar believes that the latest AMFI data reveals the fact that investors are becoming more mature and are prepared enough to figure out how to use the opportunity wisely. He added, “Constant increase in SIP inflows is a positive sign as retail investors realize the volatility in the market which is essentially the average of their purchase cost over a long investment period and they also need to worry about Don’t know how to time the market. When to choose the SIP route.”

Apart from this, investment in mutual funds through SIP increased in February. 13,686.23 compared to 13,856 crore in January. Investment in SIP remained low in February 169 crores. However, contribution from SIP (Systematic Investment Plan) has been above average 13,000 crore figure every month from October 2022.

Moving on to the debt market, Krishnan said, “With the central bank’s focus on reducing inflation, monetary policy has been designed to ensure a deflationary process.” The February rate hike of 25 basis points Despite expectations, largely due to this, of a moderation around inflation, investors are yet to see evidence of the same. This also makes investors look at shorter duration funds as these offer less volatility. In addition, other asset An increased focus across categories, and opening up of new avenues have potentially made investors prefer these over debt fund categories. As the Indian market continues to develop, a change in the rate hike cycle may bring investors back to debt funds .

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