Mutual funds' assets touch record high

Mumbai, March 10 Bouncing back from the decline witnessed in January, assets under management (AUM) of the domestic mutual fund industry breached the Rs 31.5 lakh crore-mark for the first time, settling 3.7 per cent higher at Rs 31.6 lakh crore at end-February, a Crisil research report has showed.

As per the report, the previous high recorded was at end-2020, when the asset base had settled at Rs 31.02 lakh crore.

Inflows in the open-ended debt and hybrid categories, coupled with mark-to-market gains in the domestic equity market, were the main factors contributing to the rise in the asset base in February even as outflows from equity funds capped gains, the ratings agency's research report released on Wednesday said.

Cumulatively, the industry's fund flows remained negative at Rs 1,844 crore.

Dynamic asset allocation schemes witnessed the highest net inflows for the category since April 2019 at Rs 2,006 crore in February, with investors attracted by the flexibility in asset allocation on offer. Interest in arbitrage schemes also remained firm, with net inflows at Rs 5,033 crore as market participants looked to take advantage of the volatility in the underlying equity market.

Aided by the inflows, the hybrid category recorded net inflows of Rs 4,703 crore, higher than January's net inflows of Rs 2,142 crore.

The other hybrid categories, viz., aggressive hybrid, equity savings, and multi-asset allocation categories, however recorded persistent outflows in February, though they were cumulatively lower at Rs 2,481 crore compared with the previous month's Rs 3,823 crore.

At the aggregate level, the asset base of hybrid schemes advanced 6.6 per cent, or by Rs 20,971 crore, to Rs 3.38 lakh crore in February (the highest since February 2020's figure of Rs 3.43 lakh crore).

The open-ended debt fund category recorded the lowest net inflows since the Association of Mutual Funds in India (AMFI) changed its format of dissemination in April 2019 at Rs ~1,735 crore. Liquid funds witnessed reversal of outflows seen in January, with net inflows of Rs 17,302 crore in February and led the inflow tally among debt funds. Investors also evinced interest in low duration and money market schemes, which witnessed net inflows of Rs 2,844 crore and Rs 9,580 crore, respectively.

Nearly all other categories within the open-ended debt segment saw net outflows. Short duration funds recorded the highest net outflows within the category at Rs 10,286 crore, followed by corporate bond funds at Rs 6,752 crore. Ultra-short duration, dynamic bond, banking and PSU, and gilt schemes cumulatively recorded net outflows of Rs 7,956 crore.

At an aggregate level, the asset base of open-ended debt funds ended flat at Rs 13.74 lakh crore.

The trend in fund flows within the open-ended equity category showed no signs of abating, the report showed, with net outflows in February at Rs 10,468 crore, higher than January's Rs 9,253 crore figure. Investors looked to book profits as the underlying domestic equity benchmarks hit record highs during the month -- the S&P BSE Sensex and Nifty 50 advanced 6.1 per cent and 6.6 per cent on month, respectively.

The introduction/recategorisation of flexi- and multi-cap funds had a major impact on flows in the category for the second consecutive month. The flexi-cap category recorded the highest net outflows within the category at Rs ~10,431 crore, while multi-cap funds saw the highest net inflows of Rs 4,078 crore.

As per AMFI disclosure, during February, nine multi-cap funds were recategorised as flexi-cap funds. As such, the funds mobilised and redemption figures of these funds were shown under flexi caps, resulting in negative funds mobilised and redemption figures under multi-cap funds.

Mark-to-market gains in the underlying equity market helped the open-ended equity category notch up gains of 8.1 per cnet, or approximately Rs 71,959 crore, in February. Furthermore, investors continued to pour money into equities via the systematic investment plan; however, contributions in February were slightly low at Rs 7,528 crore compared with January's Rs 8,023 crore figure. The overall open-ended equity asset base settled at a fresh record high of Rs 9.63 lakh crore on-month.

Equity exchange traded funds (ETFs) garnered net inflows of Rs 1,949 crore in February, although the figure was much lower than that seen in the previous two months. Investments in gold ETFs also remained persistent -- February marked the third straight month of net inflows for the category at Rs 491 crore, despite fall in the underlying yellow metal prices in the domestic market during the month.