In this post, we analyse the flows in India’s mutual funds industry in the month of May 2024.
Equity and Hybrid schemes
Gross inflows in equity funds grew in May compared to the previous month by . Hdfc Manufacturing fund collected Rs 9,563 crs. Even excluding the same, gross inflows in equity funds grew 11.45% percent over April 2024 and by a whopping 231% over May 2023. Net inflows were Rs 34,697 crs which were more than the gross inflows in May 2023. Thematic funds continue to get the maximum gross inflows. Focussed and ELSS schemes were the only two categories with negative inflows. Mid cap funds saw a surge in gross inflows this month.
There seems to be consistent profit booking in equity and hybrid schemes. Inflows in Arbitrage schemes grew a lot suggesting that investors are booking profits and moving into arbitrage schemes. Are they waiting for a correction to enter again? The power of compounding works over a long period of time. So investors should stay invested and not try to time the markets.
Assets in sectoral schemes were equivalent to flexi cap schemes in May 2023 but are now more than Rs 58,000 crs. Shows the popularity of these schemes in the last year or so. There will always be one particular sectoral theme that will be outperforming the market. The rest will be underperforming the market. It is difficult to determine the sector that will do well and hence a flexi cap scheme should provide consistent returns year on year as the fund manager has the flexibility to move between sectors as well as between large and other companies.
Gross inflows into index funds and ETFs have also doubled over the last one year. Will a correction happen with an almost Rs 50,000 net inflows from mutual funds into equity markets?
Debt (Fixed Income) schemes
As expected, net inflows into debt schemes plummeted by 78% to Rs 42,294 crs. This was after the surge in net inflows in April. We are likely to see net outflows in the next month due to quarter end.
Banking and PSU Bond Funds are a good proxy for those investing in fixed deposits. They are superior to FDs are they provide diversification as well as liquidity compared to CDs. Investors can easily do Systematic Withdrawal Plans (SWP) from these funds to fund their monthly expenses. Unfortunately, these do not seem very popular as the assets of these funds are Rs 81,000 crs whereas fixed deposits with banks are more than 1,84,00,000 crs more than 227 times of a surrogate product. Distributors would do well to recommend Banking & PSU funds to customers looking at investing in fixed deposits.
The link to the AMFI report on May 2024 flows is below:
https://portal.amfiindia.com/spages/ammay2024repo.pdf
