Equity MF inflows stay strong in April as redemptions fall sharply

Equity mutual funds saw net inflows of Rs 38,440 crore in April as redemptions dropped sharply, though SIP contributions declined 3 per cent month-on-month

Abhishek Kumar

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Net investments into equity mutual fund (MF) schemes, which had surged sharply in March amid the market correction, remained elevated at Rs 38,440 crore in April. While this was 5 per cent lower than the recent high of Rs 40,450 crore recorded in March, it remained significantly above the average monthly inflows seen over the past year.

Inflows stayed elevated despite a 16 per cent decline in gross inflows to Rs 70,302 crore in April, as redemptions eased 26 per cent to an eight-month low of Rs 31,862 crore, according to the latest data released by the Association of Mutual Funds in India (Amfi).

"While the inflows were marginally lower, the overall trend indicates sustained resilience in domestic investor sentiment despite the prevailing uncertain global environment and intermittent volatility in equity markets," said Himanshu Srivastava, Principal, Manager Research, Morningstar Investment Research India.

The equity market recovered strongly in April, recouping a large part of the losses seen in March amid easing concerns around the US-Iran conflict. The Nifty 50 index gained 7 per cent during the month, while broader market indices outperformed further, with the Nifty Smallcap 250 index surging more than 17 per cent.

Net inflows tracked the outperforming market segments, with flexicap, midcap and smallcap funds attracting the bulk of investments in April. Together, these categories accounted for 61 per cent of active equity net inflows. While flexicap funds drew more than Rs 10,000 crore for the second straight month, combined inflows into midcap and smallcap funds rose 9 per cent to Rs 13,437 crore.

"Smallcap funds have historically seen sharper drawdowns during periods of market stress, and the fact that investors are not only holding but actively adding to this category suggests either renewed confidence in the India growth story at the margin, or an allocation catch-up by investors who see post-correction value in smaller companies," said Nitin Agrawal, chief executive officer (CEO), Mutual Funds, InCred Money.

Despite elevated overall inflows, the industry witnessed a setback on the systematic investment plan (SIP) front. SIP inflows declined 3 per cent month-on-month (MoM) to Rs 31,115 crore. The decline is notable given that SIP inflows have largely maintained an upward trajectory in the post-Covid period.

"Market volatility may have led some investors to temporarily pause SIP contributions, although the overall base of contributing SIP accounts has remained broadly stable," said Venkat Chalasani. He added that the moderation in April SIP inflows was partly because March numbers were inflated by transactions that got pushed from February due to a holiday at the month-end.

The industry’s overall assets under management (AUM) rose 11 per cent MoM, aided by robust inflows across categories as well as mark-to-market gains. Debt funds accounted for the bulk of inflows at Rs 2.5 trillion, while hybrid funds and passive schemes attracted around Rs 20,000 crore each.

"Against the backdrop of a challenging global environment, Indian mutual fund investors have shown commendable resilience," said Navneet Munot, managing director (MD) & CEO of HDFC AMC.