Equity-oriented mutual funds continued to witness net outflows for the eight month in a row. On an general basis, the net outflow was greater than the earlier month. During the month of February 2021, the segment witnessed a net outflow of Rs 10,468.02 crore, which is greater than the net outflow of Rs 9,253.22 crore witnessed in the month of January.
With markets touching all-time highs in February, it supplied a fantastic profit booking chance for investors. Moreover, the elevated valuation levels could have also triggered rebalancing of portfolios.
“That said, the number of folios as well as gross purchase (new investments) were higher in February compared to January. This indicates that investors have now started to invest in the equity markets. But at the same time, existing investors are finding this as an opportune time to book profit as evident from the higher gross redemptions in February vis-à-vis January,” stated Himanshu Srivastava, Associate Director – Manager Research, Morningstar India, commenting on equity-oriented funds based on AMFI’s month-to-month information for February 2021.
Flexi Cap Fund category was the worst hit through the month. During February 2021, 9 Multi Cap Funds have been re-categorised as Flexi Cap Funds whereas in January 16 Multi Cap Funds have been re-categorised as Flexi Cap Funds. Therefore, continuing with the trend that we have been witnessing because June 2020, there have been rising net outflows from the funds in this category (which have been earlier a aspect of Multi Cap category). In February, the category witnessed a net outflow of Rs 10,439.9 crore, which was sharply greater than the net outflow of Rs 5933.67 crore in January.
Large Cap category was also hit really hard in the month of February with a net outflow of Rs 1,280.15 crore, clearly on the back of profit booking by investors. However, the net outflow this month was reduced than the net outflow of Rs 2,853.43 crore recorded in January. This was the third consecutive month of decline in the quantum of net outflows from the category, which indicates that more investors are now prepared to hold their investments in these funds.
Multi Cap Funds, Large & Mid Cap Fund and Focused Fund, nonetheless, have been the 3 categories to witness net inflows in February.
Like final month, this month also Multicap Fund received that highest net inflow of Rs 4077.94 crore, which was substantially greater than the net inflow of Rs 2,857.90 crore in January. “The investment mandate of Multi Cap Funds provides investors the benefit to capitalize on the investment opportunities arising in all the three segments of the equity markets viz. large, mid and small cap. With all the three-segments performing well, these funds have been attracting investor interest,” stated Srivastava.