Equity, hybrid and passive flows stay robust in Jan 2022

The story of equity flows in the month of Jan-22 was a relatively subdued story with NFOs nowhere close to the Dec-21 levels. The NFO collections in Jan-22 at Rs3,223 crore was much lower than the Dec-21 NFO collections of Rs20,616 crore. The limited NFO flows in Jan-22 were largely passive equity and debt index funds.

The overall AUM in Jan-22 was higher at Rs38.01 trillion on a closing AUM basis. There were inflows across all major categories of mutual funds including debt funds, equity funds, hybrid funds and passive funds. The AUM has shown a steady growth over the last 1 year on a mix of robust stock market indices and strong SIP flows.

The AUM net inflow for Jan-22 stood at Rs35,252 crore overall with positive net inflows across all the mutual fund asset classes. The AUM mix as on 31-Jan was Income Funds (37.18%), equity funds (35.20%), hybrid funds (12.60%) and passive & solution funds (13.41%). The residual 1.61% were close-ended funds, where AUM was largely neutral for the month. This gap of 198 bps between equity fund AUM and debt fund AUM is less than in Dec-21. While debt fund share has gone down, it has been taken up by hybrids and passive funds rather than active equity funds. Overall AUM grew 24.58% yoy from Rs30.51 trillion in Jan-21 to Rs38.01 trillion in Jan-22. In Jan-22, the share of hybrid funds and passive funds showed an improvement even as equity funds and debt lost market share.

Debt funds see positive flows in Jan-22

After heavy outflows of Rs49,154 crore in Dec-21, debt funds had some consolation in the form of net inflows of Rs5,088 crore in Jan-22. The month of Jan-22 saw a mix of inflows and outflows across different categories of debt funds.

There were a large number of debt fund categories that saw outflows in Jan-22 which was not surprising considering the monetary hawkishness. Among the specific debt fund categories, Liquid Funds saw outflows of Rs14,398 crore, low duration funds saw outflows of Rs1,963 crore, short duration funds saw outflows of Rs2,889 crore, Banking & PSU funds saw outflows of Rs2,537crore and corporate bond funds saw outflows of Rs936 crore.

Among the fund categories that saw net inflows in Jan-22, Overnight funds saw inflows of Rs19,358 crore, money market funds saw inflows of Rs4,719 crore, ultra-short duration funds saw inflows of Rs2,969 crore and floater funds Rs2,592 crore. There have been some concerns at the longer duration end with Fed turning distinctly hawkish and Indian bond yields surging sharply in the last couple of months to inch closer to the 7% mark.

Equity Fund inflows halve in Jan-22 in the absence of NFO boost

Net inflows into equity funds almost halved MOM from Rs25,077crore in Dec-21 to Rs14,888 crore in Jan-22. Almost all the categories of equity funds saw net inflows in Jan-22.

During Jan-22, Multi-cap funds plus flexi-cap funds led the way with inflows of Rs3,419 crore. Among other key categories, Sector Funds saw inflows of Rs2,073 crore, Large Cap funds Rs1,890 crore, large & mid-cap funds Rs1,722 crore, mid-cap funds Rs1,770 crore, focused funds Rs1,813 crore and small cap funds Rs1,499 crore. In a reversal of trend, ELSS funds saw net inflows of Rs805 crorein Jan-22. Equity funds saw cumulative net inflows of Rs125,346 crore in the 11 months since Mar-21; the 11th consecutive month of positive equity fund inflows.

Hybrid fund inflows bounce back smartly in Jan-22 

Net flows into hybrid funds were tepid at Rs551 crore in Dec-21 but bounced back smartly to Rs12,132 crorein Jan-22. This was despite the absence of any significant NFO contribution in Jan-22. Arbitrage funds led the hybrid inflows at Rs6,138cr in Jan-22. Balanced advantage funds saw inflows of Rs2,391 crore and Aggressive Hybrid Funds Rs1,844 crore in Jan-22. Other hybrid categories were also positive, albeit on a smaller scale.

Passive flows in Jan-22 were not as robust as in Dec-21 but was positive nevertheless. In Dec-21 passive fund inflows were Rs18,703 crore compared to just Rs8,861 crore in Jan-22. Index funds saw smart inflows of Rs4,915 crore while Debt and other ETFs saw inflows of Rs4,009 crore in Jan-22. Among other passive categories, gold ETFs saw limited outflows while FOFs attracted small inflows in Jan-22. The hybrid, passive and solution funds, now, jointly account for 26.01% of overall mutual fund AUM.

SIP flows cross Rs100,000 crore in just 10 months of FY22

In Sep-21 the magic mark was crossed for the first time with net SIP flows of Rs10,351 crore. That trend was accentuated in Oct-19 with Rs10,519 crore and Nov-21 at Rs11,005 crore. For Dec-21 SIP flows stood at Rs11,305 crore while Jan-22 built on that trend to record Rs11,517 crore SIP flows. For the first time ever, SIP flows crossed the Rs1 trillion mark in the first 10 months of the fiscal year.

The moral of the flow story is two-fold. Firstly, SIPs are emerging as the veritable driver of flows into equity and quasi equity fund categories. Secondly, outside of equity and debt funds; the hybrids and passives now account for 26.01% of the overall mutual fund AUM. Clearly, alternatives have emerged as an asset class and that is an optimistic tone to start year 2022.