MF investment: Equity mutual fund inflows dip 14% in November to Rs 35,943 cr, 26% drop in large cap funds

MF investment:  Equity mutual fund inflows in November 2024 amounted to Rs 35,927.3 crore, marking a 14.1% decrease from Rs 41,865.4 crore in October, according to data from the Association for Mutual Funds in India (AMFI). 

Large-cap fund inflows dropped by 26.3%, falling from Rs 3,452.3 crore to Rs 2,547.9 crore in November. In contrast, small-cap funds experienced a 9.0% increase, rising from Rs 3,772 crore to Rs 4,112 crore. Mid-cap funds also saw a slight increase of 4.3%, climbing from Rs 4,683 crore to Rs 4,883.4 crore.

The mutual fund industry's total Assets Under Management (AUM) increased to Rs 68.08 lakh crore in November from Rs 67.25 lakh crore in October, as reported by AMFI.

In terms of Systematic Investment Plans (SIPs), November saw a total investment of Rs 25,320 crore, slightly below the Rs 25,323 crore recorded in October. This decline in equity fund inflows corresponded with a subdued market performance, as both the Sensex and Nifty decreased by -0.27% and -0.31% respectively in November.

"The SIP numbers suggest that direct SIPs which were mostly started based on technology driven apps, have seen have higher discontinuation rates during market fluctuations and this is primarily due to the lack of advisory support. Regular SIPs, supported by human advisors, attract larger investments and shows more resilience as it is based on futuristic outlook and strategy. Market has seen volatility due to political events, such as India's general elections and the U.S. elections and China Stimulus policy and such events leads to volatility which increases in SIP cancellations," said Feroze Azeez, Deputy CEO, Anand Rathi Wealth Limited. 

"Despite these challenges, net equity inflows remain strong, supported by robust small-cap investments that reflect sustained retail investor confidence. However, a continued decline in SIP registrations and rising discontinuation rates could temporarily  jeopardize the domestic flows and the market stability," Azeez added.

"Equity mutual funds witnessed a decline in net inflows to Rs 35,943 crores in November 2024, down from Rs 41,887 crore in October, down 14% on a month-on-month (MoM) basis. Thematic funds, accounting for 21% of the net inflows in Equity Oriented Schemes, recorded de growth of 37% MoM. The 5-6% correction in the domestic equity markets in October, huge outflows by FIIs followed by election in the US and a few assembly elections in India in November might have led investors to remain on the sidelines till clarity emerges. However, SIPs remained above the Rs 25,000 crore mark for the second time in row. This indicates that investor conviction is still strong on the India growth story.  If we look at the individual fund categories, mid and small cap funds recorded MoM growth in net inflows by 4.3% to Rs 4,883 crores and 9% to Rs 4,112 crores, respectively. Large cap funds, despite being better placed in valuation, de grew by 26% to Rs 2,548 crores. ELSS funds recorded increase in net inflows by 61% over October 2024," said Deepak Ramaraju, Senior Fund Manager, Shriram AMC.

In November, Exchange-Traded Funds (ETFs) experienced a notable decrease in inflows, plunging from Rs 13,441.8 crore in October to Rs 1,531.2 crore. In November, there was a decrease in inflows for sectoral and thematic funds, which dropped to Rs 7,658 crore from Rs 12,278.8 crore in October.

On the other hand, Equity-linked Savings Schemes (ELSS) saw an increase in inflows, rising to Rs 618.5 crore in November from Rs 362 crore in October.

New Fund Offerings (NFOs) had inflows of Rs 4,052 crore in November, down from Rs 6,078 crore in October. 

In November, there was a decrease in inflows for dividend funds, dropping from Rs 532.8 crore in October to Rs 2,166 crore. Liquid funds also experienced a decline in flows, aligning with the market's liquidity conditions.

In the fixed-income category, inflows into debt funds decreased by 92% to Rs 12,915.90 crore on a monthly basis. Categories such as Liquid Fund, Short Duration Fund, and Floater Fund experienced net outflows during the month. Conversely, inflows into Overnight Fund, Ultra Short Duration Fund, and Money Market Fund declined.

In November, hybrid funds experienced a 76% decrease in inflows to Rs 4,123.69 crore due to outflows in Arbitrage Funds. Similarly, inflows into the Balanced Hybrid Fund/Aggressive Hybrid Fund, Dynamic Asset Allocation/Balanced Advantage Fund, and Multi-Asset Allocation Fund categories also declined during the month.

"Debt-oriented funds continued to attract inflows in November, though the quantum was relatively modest. The funds registered inflows of INR 12,915.90 crore, a noticeable decline compared to the substantial inflows of INR 1,57,402.30 crore recorded in October. Overall, 9 out of 16 debt mutual fund categories recorded net inflows in November. Liquid funds experienced the highest outflows, amounting to INR 1,778.98 crore. Meanwhile, investors showed a strong preference for categories like low-duration funds, ultra-short-duration funds, money market funds, corporate bond funds, and overnight funds. Together, these categories accounted for approximately 85% of the inflows across nine categories that recorded positive figures, highlighting a strong preference for low-risk, highly liquid investment options," said Nehal Meshram, Senior Analyst – Manager Research, Morningstar Investment Research India.

In November, gilt funds with a 10-year constant duration and long-duration funds experienced minimal inflows, with Rs 274 crore and Rs 79 crore, respectively.

On the other hand, liquid funds faced the highest outflow of Rs 1,778 crore in November, in contrast to an inflow of Rs 83,863 crore in October.

Additionally, Index Funds and Gold Exchange-Traded Funds witnessed a decrease in demand in November.

"Gold continues to glitter with investors showing their affinity towards yellow metal in November as well. Gold ETF category witnessed a net inflow of INR 1,257 crores in November. Since Jan 2020, this category has received a net inflow of INR 25,409 crores, signifying enhanced investor interest in this segment.
However, while the fund mobilized was less compared to October, redemption number was higher. This signifies that investors would have chosen to book profits with gold trading at elevated levels and impending marriage season, where the demand for physical gold is high," said Himanshu Srivastava – Associate Director- Manager Research, Morningstar Investment Research India

Overall, open-ended mutual funds recorded net inflows amounting to Rs 60,363.70 crore in November, compared to Rs 2,39,907 crore in October.