Equity funds inflow decline by 4% to Rs 39,687 crore in January
With benchmark index Nifty 50 registering a decline of nearly 1%, the inflows in equity mutual funds declined by 4% to Rs 39,687 crore in January against an inflow of Rs 41,155 crore in December.
All the 11 equity mutual fund sub-categories have received inflows in the mentioned period with sectoral and thematic funds leading the inflow chart. The sectoral and thematic funds received a total inflow of Rs 9,016 crore witnessing a decline by 41% on a monthly basis from an inflow of Rs 15,331 crore in December.
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“Given in recent times some of the sector funds have delivered good returns, thus attracting investors. It’s important to understand that every sector has different dynamics and drivers and that one sector doing well doesn’t guarantee that all sectors would perform well. Hence, investors should not look at all the sector funds from the same lens. They should be prudent and observe caution while investing in these funds,” said Himanshu Srivastava – Associate Director- Manager Research, Morningstar Investment Research India
Small cap funds received an inflow of Rs 5,720 crore in January witnessing a growth of 23% on a monthly basis. Flexi cap funds and mid cap funds received an inflow of Rs 5,679 crore and Rs 5,147 crore respectively in the similar time frame.
Commenting on the mid and small cap funds, Srivastava said, “These two segments continue to receive strong inflows highlighting investors preference for this segment, largely driven by the high returns that they have generated over the last few years.”“Since both the segments witnessed sharp correction, investors would have chosen to make use of this opportunity and enhance their exposure to these segments. However, investors should be wary of inherent risk in these segments and be judicious while investing. The investment in mid and small cap funds should be in line with their risk appetite,” he added.The large & mid cap funds received an inflow of Rs 4,122 crore in January registering a growth of 8% from the previous month. Multi cap followed the inflow chart and received an inflow of Rs 3,567 crore in the similar time frame. The inflows in the multi cap funds went up by 16% from an inflow of Rs 3,075 crore in December.
Large cap funds registered a growth of 52% in the monthly inflows with receiving total inflows of Rs 3,063 crore in January against an inflow of Rs 2,010 crore in December. Value and contra funds welcomed an inflow of Rs 1,556 crore in January.
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On a month-on-month basis, the ELSS funds saw the highest jump in inflows by 324% to Rs 797 crore from Rs 187 crore in December.
“Given the tax planning season, the ELSS category too received decent flows during the month. While large caps are more attractive from the valuation perspective, they are more stable from the asset allocation perspective and during volatile markets compared to their mid and small cap counterparts. These two factors would be playing a crucial role in investors’ decision to have a reasonable exposure in the large cap segment as well,” Srivastava commented.
The inflows in focused funds jumped by 72% on a monthly basis from Rs 455 crore in December to Rs 783 crore in January.
The dividend yield funds received the lowest inflows of Rs 214 crore in January witnessing a decline by 23% on monthly basis from an inflow of Rs 277 crore in December.
“It has been observed that over the years, investors have displayed a more mature approach towards investing by not panicking during correction and rather utilizing it to build exposure. However, it’s important for investors to have the right and reasonable expectation and not get swayed away by the quantum of returns generated in the past. Equity oriented mutual funds are long-term investment destinations and investors must invest in them from that perspective rather than chasing short term trends,” Srivastava recommended.
(Disclaimer: Recommendations, suggestions, views, and opinions given by experts are their own. These do not represent the views of the Economic Times)