In this post, we analyse the flows in India’s mutual funds industry in the month of April 2024. A link to our analysis for the analysis of the flows in March 2024 is given below. A link to the April 2024 AMFI flows report is also appended below.
Equity and Hybrid schemes
Gross inflows in equity and hybrid funds were mostly unchanged from April. An uptick was mainly seen in Arbitrage Funds. Net inflows into equity funds did see a fall from 22,000 crs to 18,900 crs. Small cap funds which saw higher redemptions in March 2024 saw lower redemptions in April leading to positive net inflows. Thematic funds continued to lead in the net inflows.
A thematic fund based on innovation garnered Rs 700 crs in its NFO in April 2024. An NFO for retirement solutions managed to collect Rs 40 crs. Clearly, people are more excited investing in Innovation than on their retirement. Six index funds collected Rs 269 crs. They were all launched by one AMC.
Sebi’s rule of creating fund categories, defining them tightly and allowing each AMC only one scheme in most categories has made life simpler for investors. Older AMCs can launch schemes only in the thematic and Index funds categories. These are also being driven by the new indices that are being created. The more the indices, the more the ability of the AMCs to launch new schemes.
Scheme categorisation has also allowed an easy comparison of the performance and risk characteristics of large cap funds, flexi cap funds, etc. It may still be a challenge for funds where the minimum investment is at a lower threshold say mid cap and small cap funds or even dynamic allocation funds as AMCs have the flexibility to invest the balance funds in all kinds of equity and even debt. Accordingly, the comparison of such schemes should be based on their asset allocation.
Flexi cap funds have the most assets followed by sectoral, large cap, mid cap and then small cap funds. Mid cap funds may become larger than large cap funds. Small cap funds are already larger than ELSS funds. This may prove that it is still past performance that is driving sales into these schemes. Investor should stick to their asset allocations and not chase returns.
Debt (Fixed Income) schemes
The inflows and outflows into debt schemes are 10-12X of those into equity schemes. But nobody seems to notice the same. The liquid and overnight funds are second only to Other ETFs. They collected Rs 8,63,000 crores between them. They offer good returns and great flexibility and are a good substitute for those keeping more than Rs 25,000 in their bank accounts.
Money market funds can play an important role in your debt portfolio as the duration is low, liquidity is good and one can generate decent returns with great flexibility. These collected Rs 61,000 crs in April. We are certain that most of them must be from corporates and HNIs.
Conservative Hybrid Funds are also nice schemes for those who are ultra conservative but still crave for a double digit return. However, their flows and assets are abysmal.
Multi Asset Funds which have provided double digit returns with low volatility are also not very popular and fare a little better than CHFs in terms of assets.
The Industry could do well to promote these categories of funds.
The link to our our analysis of March 2024 inflows is below:
https://www.linkedin.com/feed/update/urn:li:activity:7188159761790496768/
The link to the AMFI report on April 2024 flows is below:
https://portal.amfiindia.com/spages/amapr2024repo.pdf
