Mutual Funds Updates:
In April, net inflows into equity mutual funds decreased by 16.4% compared to the previous month, amounting to Rs 18,917.1 crore. This decline was particularly notable in large and mid-cap funds. Despite a downturn in March, small-cap funds maintained robust inflows.
Data from the Association of Mutual Funds in India (AMFI) indicates that inflows through systematic investment plans (SIPs) exceeded Rs 20,000 crore in April, marking a historic milestone.
In April, small-cap funds, which experienced unusual net outflows in March, saw net inflows of Rs 2,208.7 crores. The March outflows were attributed to industry experts’ observations of year-end profit-taking for tax purposes. Conversely, net inflows into large-cap funds decreased significantly to Rs 357.6 crore in April from Rs 2,127.8 crores in March. For large and mid-cap funds, net inflows amounted to Rs 2,638.9 crores compared to Rs 3,215.6 crores the previous month.
Regarding the record SIP flows in April, A Balasubramanian, managing director and CEO of Aditya Birla Sun Life AMC, remarked, “It demonstrates higher investor acceptance of mutual fund investment as a means to create long-term wealth via SIPs. Investors recognize that goals can be achieved through mutual fund investments, given the industry’s ability to provide a rewarding experience to unit holders.”
In April, the domestic benchmark index Sensex rose over 1%, marking its third consecutive monthly gain, while the BSE Smallcap index ended a two-month losing streak with a nearly 10% increase.
Despite volatility related to the General Elections, data indicated that retail investors continued to invest in the market. The number of new SIPs registered in April reached a record 63.65 lakh, pushing SIP AUM to Rs 11.26 trillion. SIP inflows for the month totaled Rs 20,371.5 crores, up from Rs 19,270.9 crores in March.
The overall net AUM of the mutual fund industry increased to Rs 57.26 trillion in April from Rs 53.40 trillion in March, primarily due to debt funds witnessing inflows of Rs 1.89 trillion compared to outflows of Rs 1.98 trillion in March due to seasonal factors.
Within the equity segment, sectoral/thematic funds continued to attract the highest net inflows at Rs 5,166.1 crores in April compared to Rs 7,917.7 crores previously.
Chandraprakash Padiyar, senior fund manager at Tata Asset Management, emphasized the strong inflows into sectoral/thematic funds, stating, “Our recommendation is that diversified funds would be a better long-term investment option over sectoral/thematic funds, especially when valuations are high.”
Addressing KYC issues faced by NRIs:
AMFI stated that it is addressing KYC validation issues encountered by NRIs following the new norms implemented from April 1. These norms have resulted in some mutual fund investors being unable to carry out transactions due to their KYC being ‘on hold’. AMFI reported that as of Thursday, 98-99% of transactions were proceeding smoothly, with only 3% of KYCs having ‘on-hold’ status.
Standards for preventing front-running mechanism:
AMFI is set to release details of standards for an institutional mechanism to prevent front-running by Asset Management Companies within a month. On April 30, SEBI announced steps to mandate AMCs to establish an institutional mechanism to prevent potential market abuse. While SEBI will formulate the framework, it has tasked AMFI with detailing the standards for this mechanism.
