Equity mutual fund schemes have raked in Rs 46,200 crore net lumpsum inflows in the past six months (ending February 2024), almost thrice the inflow in the previous six-month period. In February alone, investors poured in Rs 11,500 crore through the lumpsum route, the highest since March 2022, shows data from the Association of Mutual Funds in India (Amfi).
MF officials say that investors are making use of choppy market conditions to deploy additional money into equities.
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“Lumpsum inflows are typically discretionary, and investors often choose to deploy them during market corrections. This approach is logical and is distinct from SIPs (Systematic Investment Plans), which involve a commitment to invest from future cash flows rather than an existing kitty,” said Neelesh Surana, Chief Investment Officer at Mirae Asset Investment Managers (India).
“It is difficult to point out the reasons as the flows depend on various factors, given the diverse investor base. However, what we have generally seen is that lumpsum inflows catch pace when the market corrects,” said B Gopkumar, Managing Director (MD) and Chief Executive Officer (CEO), Axis MF.
The equity market has been volatile in recent months with the large-cap index Nifty moving into the consolidation phase. The index swung 2.4 per cent last month and registered over 0.5 per cent decline in three sessions. The Nifty Smallcap 100 index was even more volatile as the regulator showed concerns over the growing valuations in the midcap and smallcap space. The index declined over 4 per cent on 12 February. It was down over 1 per cent on two other occasions.
At the same time, net inflows through the Systematic Investment Plan (SIP) route were comparatively muted. The net SIP inflows stood at Rs 38,210 crore in the September 2023-February 2024 period, 22 per cent higher than the March 2023-August 2023 collection. Net SIP inflows are derived by excluding the outflows from SIP accounts from the gross SIP inflows.
While SIP flows are considered agnostic to market conditions, lumpsum investments are highly correlated with the prevailing market sentiment. Lumpsum inflows, unlike SIPs, are mostly opportunistic in nature due to the timing involved in such investments, say industry executives. They add that the majority of such flows come from high net-worth individuals.
“Timing the market is not always the right approach but makes sense if deployment happens when markets are in a reasonable valuation zone, and it is in a staggered manner as and when the market falls,” said Surana.
“Investors who have over-allocated to small-caps can also look to rebalance their portfolio to bring it back in line with their asset allocation framework. We believe that the ideal core funds for the long term now should be either ‘Multi-cap’ or ‘Large and Midcap’ category,” he added.
The surge in lumpsum inflows boosted the net inflows into equity schemes to Rs 26,860 crore in February, the highest since March 2022. Apart from the Rs 11,500 crore inflows through lumpsum, the rest of the inflows came through SIPs and new fund offerings (NFOs). While SIPs contributed Rs 6,470 crore, NFOs brought in Rs 11,470 crore.