Investors pulled out Rs 27,569 crore last month, the highest since September 2021, when equity MF units worth Rs 27,979 crore were redeemed. As a result, net inflows into equity schemes declined to a six-month low of Rs 3,240 crore in May, data from the Association of Mutual Funds in India (Amfi) showed on Friday.
After a weak performance between December and February, the markets have been on an upward trajectory since March-end, buoyed by robust inflows from foreign portfolio investors. In May, the Nifty50 index rose more than 2 per cent, extending its three-month gain to 5 per cent. On the other hand, the Nifty Midcap 100 index rose 6.2 per cent in May, while the Nifty Smallcap 100 index gained 5.1 per cent, stretching their three-month gains to 10 per cent and 7 per cent, respectively.
“Profit booking in a rising market, along with probable expenses towards vacation and education, could have led to lower investments in mutual funds in May,” observed Manish Mehta, national head (sales, marketing & digital business), Kotak Mahindra AMC.
Investors pulled out the highest amount from largecap, flexicap and thematic & sectoral schemes. The three fund categories together recorded an outflow of Rs 13,245 crore. This resulted in negative net inflows into these categories with largecap schemes recording the highest net outflow at Rs 1,362 crore. However, smallcap schemes continued to rake in good inflows. In May, net inflows into smallcap schemes stood at Rs 3,283 crore, the highest since Amfi started releasing the data in April 2019.
Net inflows into equity MF schemes have shown an inverse correlation with market performance in the recent past. Investors put in higher amounts into equity MF schemes during market downturns as compared to periods when markets are going up. Redemptions also go up during phases of market rally.
The inflows into debt schemes along with the mark-to-market gains in equity schemes in the last two months led to almost a 10 per cent rise in the total assets under management (AUM) to Rs 43.2 trillion at the end of May.
“Overall MFs have shown an uptick even in the midst of volatile markets. The MF industry’s net AUM stood at Rs 43.2 trillion as on May 31, 2023. Investors are choosing to invest in categories where they find value. This month, we observed the highest AUM through SIP, with the highest ever SIP contribution of Rs 14,749 crores and a surge in new SIP registrations. These figures indicate that retail investors have maintained their confidence in SIP as their preferred investment instrument for wealth creation,” said Venkatesh.