Even though stock markets went into a tailspin in March and benchmark indices crashed in line with the global trend, mutual fund investors don’t seem to have pressed the panic button.
Data for March released by the Association of Mutual Funds in India (AMFI) shows that net inflows into equity-oriented schemes amounted to Rs 11,722 crore, a 12-month high, and gross fund mobilisation for equity schemes — total money invested — stood at Rs 30,109 crore, a 24-month high.
There was also an addition of 7.1 lakh new equity accounts during the month — the highest monthly addition in at least 12 months.
This, when both the Sensex and Nifty have lost 23 per cent in March as the COVID pandemic roils markets and threatens global growth.
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The equity assets under management, however, fell 18 per cent over February to Rs 650,146 crore on account of the mark-to-market losses. The overall industry average asset under management fell to Rs 24.7 lakh crore in March, from an all-time high of Rs 28.28 lakh crore in February 2020.
Shows markets have got deeper
Low equity valuations provide an opportunity to generate higher returns when interest rates are falling and fixed deposit and small savings rates have seen deep cuts. The record inflow underlines the deepening of the market and signals investor hope that these hard times will pass.
Data shows that equity investors took the March fall as an opportunity to invest. Despite the sharp decline of up to 13 per cent in a day in the premier indices in March and the index hitting the circuit twice in a month — forcing exchanges to shut — they not only continued with their investments but also came in with fresh investments.
While the gross fund mobilisation by the industry in the equity schemes amounted to Rs 30,109 crore in March, the redemptions for the month stood at Rs 18,386 crore, resulting in a net inflow of Rs 11,722 crore.
This is in sharp contrast to what has been seen in the past.
During the global financial crisis in 2008-09, when the Sensex fell sharply 24 per cent in October 2008, equity mutual funds had seen a net outflow of Rs 706 crore.
This reversal of trend underlines how domestic investors have emerged as a strong counterbalance against foreign portfolio investors — a sign that the markets have deepened.
Even in March, as FPIs sold their their holdings worth a net of Rs 118,203 crore, DIIs (domestic institutional investors) pumped in a net of Rs 55,595 crore into the capital markets.
Debt assets under management fell from Rs 12.63 lakh crore in February to Rs 11.47 lakh crore in March. Said N S Venkatesh, CEO, AMFI: “The decline on the debt side is on account of quarter-end phenomena… banks maintaining capital adequacy norms and corporates fulfilling advance tax obligations. These funds will return in April.”
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