Equity mutual fund investors hold steady despite market correction

Assets under management (AUM), which stood at ₹35.4 trillion at the end of February, declined 6.7 per cent to ₹33 trillion by March 13.

However, the fall in AUM was less severe than the decline in equity markets, indicating that equity schemes continued to garner net inflows during the period.

Largecap funds saw their AUM decline 7.3 per cent over the two-week period, compared with a 7.9 per cent correction in the Nifty 100.

Flexi-cap funds recorded a 6 per cent drop in AUM, versus a 7.7 per cent fall in the Nifty 500.

In the case of smallcap funds, AUM declined 5.5 per cent, while the Nifty Smallcap 250 index corrected 6.4 per cent.

While these comparisons are not strictly like-for-like due to differences in portfolio composition, they offer a directional sense of inflow trends.

According to senior MF officials at two large fund houses, one-time investments into equity MF schemes — which had remained subdued for nearly a year — have picked up this month.

“We are seeing a pick-up in lump sum investments, driven by cash deployment as investors use the market correction to increase their equity exposure,” said an official.

Net inflows into active equity schemes was around ₹11,000 crore during the two-week period, said an official who had access to estimates provided by registrar and transfer agents.

At this pace, the net inflows for the full month may come in lower compared to February.

Wealth managers and advisors say they have been advising investors with low-equity allocation to raise exposure in a staggered manner as valuations have improved.

"What we are seeing is a reset in valuations, particularly in the mid and smallcap segments, which had run up sharply. This is an important time to do portfolio rebalancing, especially for clients who have high fixed income exposure. We are recommending a slow and gradual shift in exposure towards equities to such clients,” said Ankur Punj, managing director (MD) - business head, Equirus Wealth.

Systematic investment plan (SIP) inflows are also expected to be higher in March as month-end (February) instalments were pushed into this month, with the last working day of February falling on the 27th, according to information shared by the Association of Mutual Funds in India (Amfi) during a call with journalists earlier this month.