Inflows into small-cap MFs dip 10% in Feb amid redemptions

Inflows into midcap schemes too declined by 12% to ₹1,808 crore

Inflows into smallcap mutual fund schemes moderated by 10 per cent last month to ₹2,922 crore against ₹3,257 crore in January due to largescale redemption, amid concern over high valuation and strong signals from the Securities and Exchange Board of India (SEBI) on the froth developing in these schemes.

The redemptions from smallcap schemes increased 5 per cent to ₹3,975 crore last month against ₹3,777 crore in January, according to the Association of Mutual Funds in India data released on Friday.

Inflows into the midcap schemes also declined 12 per cent to ₹1,808 crore (₹2,061 crore). Overall, equity inflows were up at ₹26,866 crore (₹21,781 crore) on the back of robust new fund offers, which collected ₹11,720 crore (₹6,817 crore).

BETTER DISCLOSURE

Venkat Chalasani, CEO of AMFI, said the intention of the regulator and the industry is not to stop inflows into smallcap funds but to enhance disclosure and transparency so that investors can make informed decisions while investing in these funds.

The recent measures taken around mid and smallcap funds are an ongoing process and part of the risk management framework, which takes into account liquidity, volatility, and transparency, he added.

“I believe inflows into smallcap funds will continue in a calibrated manner after proper disclosure by the fund houses, and individual mutual funds will take the call on how to handle it based on their own assessment,” he said.

If the risk management of other schemes calls for disclosures like that of small caps, they will be taken after discussion in the risk management committee meeting, said Chalasani, as the ultimate aim of the industry is to protect investors’ interest.

Interestingly, investments in large and midcap schemes increased to ₹3,157 crore (₹2,330 crore), while thematic schemes stole the show with an inflow of ₹11,263 crore (₹2,330 crore), aided by five new fund offers collecting ₹7,178 crore.

Melvyn Santarita, Analyst at Morningstar Investment, said the dip in smallcap inflows was due to redemptions, which were the thirdlargest among the equity schemes, as investors opted to book profits on this category’s better performance.

SIP INFLOWS UP

Inflows through the Systematic Investment Plans (SIPs) were up to ₹19,186 crore (₹18,838 crore), with the highestever SIP asset under management of ₹10.52lakh crore (₹10.27lakh crore).

Investments in debt funds fell to ₹63,809 crore (₹76,469 crore). The total AUM of mutual funds was up 3 per cent last month at ₹54.54lakh crore compared with ₹52.74lakh crore in January.

Anand Vardarajan, Business Head at Tata Asset Management, said, “The tight liquidity situation has led to higher yields in the debt market, even as investors now seem more constructive about taking exposure in medium and longerduration debt funds. This was visible in flows seen in short term, corporate bonds, and longduration funds.”