Equity MFS saw assets growth in May
The industry is likely to post net inflows for the third straight month
Equity mutual funds (MFS) are expected to report inflows for the third consecutive month in May. Several important categories in equity funds witnessed a surge in assets under management (AUM) in May, but it remains to be seen whether this is on account of incremental flows or only to do with appreciation in stock prices.
The benchmark Sensex rose 6.5 per cent last month — its best monthly showing this calendar year. The mid-cap and small-cap indices advanced 7.1 per cent and 8.9 per cent, respectively.
The Association of Mutual Funds in India (Amfi) will release official numbers next week. Industry players said most categories witnessed net inflows amid the benchmark Nifty making new record highs. This is contrary to earlier February when equity schemes reported outflows, even as the markets made fresh highs.
“Earlier, we saw investors simply booking profits, thinking that it’s a short-term rally. But now, my feeling is that investors are getting more confident about the prospects of the economy and the markets,” said G Pradeepkumar, CEO Union AMC.
Equity-oriented schemes saw net inflows of over ~9,100 crore in March, after a gap of eight months. Between July 2020 and February this year, such schemes saw cumulative net outflows of ~52,725 crore, even as the benchmark Sensex surged more than 40 per cent during the period. In April, equity schemes had seen net inflows of ~3,437 crore.
Most equity sub-categories witnessed an increase in AUM on a month-on-month basis in May, as equity markets zoomed up. Categories like large-cap funds, flexi-cap funds, and midcap funds saw a steady increase in assets. In May, the Sensex gained around 6.5 per cent, while the mid-cap index surged 7.1 per cent.
MFS were net buyers in the cash market for the second consecutive month. In May, they bought shares worth nearly ~200 crore (until 24 May), shows the data from the Securities and Exchange Board of India (Sebi).
Domestic equity fund managers had pulled out around ~1.23 trillion from Indian stocks amid consistent outflows between July 2020 and February 2021 because of redemption pressure.
Among the categories that saw the biggest jump in assets are large-cap and flexi cap funds. The large-cap fund category saw its AUM increase from ~1.79 trillion at the end of April 2021 to ~1.88 trillion in May, according to the data from Amfi. The flexi-cap segment witnessed its AUM increase by ~9,157 crore to ~1.70 trillion in May.
According to industry executives, investors have been attracted towards the equity funds and they have generated superior returns compared to other financial products.
“Other asset classes like fixed income and guaranteed products have been giving much lower rates. Even gold has not done well compared to the rally earlier. So, given all these factors, investors think that on a long-term basis, the market recovery is sustainable,” added Pradeepkumar.