The equity mutual funds inflows surged month on month (MoM) to Rs 7,280 crore in December, data released by the Association of Mutual Funds in India (AMFI) said. In November, equity mutual funds witnessed a net inflow of Rs 2,224 crore. The Systematic Investment Plan (SIP) has once again hit record high in the month of December, while witnessing inflow of Rs 13,573 crore.

The increase in the amount of SIP collected shows that retail investors are taking a disciplined approach to their mutual fund investment. During the calendar year, SIP inflows averaged more than Rs 12,500 crore per month, helping investors to stay in the stock market and benefit from rupee cost averaging. The steady inflow suggests resilience in domestic inflows, which have been strong counterbalance to FPIs (Foreign Portfolio Investors) selling.

A look at debt funds

Debt funds witnessed significant outflows to the tune of Rs 21,946.74 crore during the month of December 2022. Although all debt fund categories witnessed except for the ultra-short duration and long duration funds, it is liquid fund that witnessed a significant outflow of Rs 13,852 crores. This is starkly different in comparison with November data when debt funds witnessed a net inflow to the tune of Rs 3,668.59 crore.

During the year 2022, debt funds witnessed and overall outflow during 7 months of the 12. While funds with shorter tenures have seen heavy outflows, those of longer duration and gilt funds have seen outflows of a lower magnitude. Typically, large flows have been witnessed in ultra-short term, overnight and liquid categories.

This is largely because a majority of the investors into these categories are institutional investor who park their money over the short term. The end of the quarter effect also seems to have had an impact on the flows.

The corporate bond fund outflow came in at Rs 713 crore vs Rs3,466.4 crore inflow (MoM). The total Assets Under Management (AUM) stood at Rs 39.88 lakh crore vs Rs 40.37 lakh crore (MoM). The hybrid fund inflow stood at Rs 2,255.3 crore vs Rs 6,477.3 crore outflow (MoM).The liquid fund outflow came in at Rs 13,852 crore versus Rs 34,276 crore inflow month-on-month. The ETF inflow stood at Rs 8,788 crore versus Rs 1,976 crore month-on-month. The credit risk outflow for December was Rs 276 crore versus Rs 204 crore outflow in November.

A look at performance of gold

Gold witnessed outflows to the tune of Rs 273.19, likely owing to a lot of profit booking in the category. Gold prices have been witnessing an uptrend over the recent months and this has likely triggered in a lot of investors booking profits in the category. There has also been a reduction in the number of folios over the past month.

What experts have to say on the data?

Commenting on the same, Akhil Chaturvedi, Chief Business Officer at Motilal Oswal AMC said that the jump in equity funds was led by increased flows in mid and small cap categories which after the recent fall has started to look attractive in terms of valuations.

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"We are also seeing highest inflows in our midcap fund in line with the overall industry. SIPs continue to create new milestones with above 13k crores of inflows for the 3rd straight month. This highlights the strong domestic flows which has also helped to negate the recent selling by FIIs," he said.

"The industry grew at a slower pace in 2022 due to uncertainty in stock markets, and changing interest rate scenarios affecting the business environment at large. Understandably, investors have been in step with these changes by reallocating their investments between equity, debt and hybrid schemes," Gopal Kavalireddi, Head of Research at FYERS, said.

Equity schemes have got inflow to the tune of Rs 1.61 lakh crore last year as against Rs 96,700 crore in 2021. In December, equity schemes saw a net inflow of Rs 7,303 crore, much higher than Rs 2,258 crore in the preceding month. The schemes have been witnessing incessant net inflow since March 2021 and before this, the equity schemes had witnessed outflows for eight straight months on account of the COVID-19 pandemic.

Higher awareness about equities and their ability to create wealth over a longer term is what has led to this increase in flows in equity-oriented schemes in 2022.

"Maturing of the retail investor is the reason for the consistent inflow in equities. 2022 has been a volatile year. People have used opportunities of corrections to average down and continue to add money," Radhika Gupta, MD and EO of Edelweiss AMC, said.

Going ahead, experts believe that growth in the asset base in 2023 would be driven by economic growth and retail participation from young investors.

-With agencies inputs

First Published:Jan 10, 2023 12:22 PM IST