Inflows into equity MFs hit 1-year high in March on robust SIP and thematic fund investments

• Inflows into equity-oriented mutual funds hit a 12-month high in March 2023 at ₹20,534 crore.
• These strong flows in March were aided by constant investments into thematic funds and dividend yield funds, at ₹3,928 crore and ₹3,715 crore respectively.
• Contribution of retail investors through SIPs hit a record high of ₹14,276 crore in March as compared to ₹13,686 crore in February and ₹13,856 crore in January.

Inflows into equity-oriented mutual funds hit a 12-month high in March 2023 at ₹20,534 crore aided by strong flows into thematic funds and record retail investor contribution through SIPs, as per Association of Mutual Funds in India (AMFI) data released on Thursday.

The inflows in March 2023 were the highest since last March, when ₹28,463 crore flowed into equity-oriented funds on the back of robust SIP (systematic investment plan) flows. In February 2023, this number was ₹15,685 crore.

Strong flows into equity-oriented funds were aided by constant flows in thematic funds and dividend yield funds, at ₹3,928 crore and ₹3,715 crore, respectively, in March 2023.

Thematic funds have created a buzz among investors given inflows into sectoral/thematic funds have seen a four-fold jump from January levels of ₹903 crore. They rose to ₹3,856 crore in February 2023 and hit ₹3,928 crore in March.

In the last six months, 12 new funds have been launched in the thematic schemes category with multinational companies (MNC) fund, dividend yield fund and business cycle fund catching investors’ attention.

Such funds are popular because investors are looking for value creation options beyond benchmark indices and thematic funds offer investors an opportunity to broaden their investment options.

Contribution of retail investors through SIPs hit a record high of ₹14,276 crore in March as compared to ₹13,686 crore in February and ₹13,856 crore in January.

“The SIP amount also has hit an all-time high of ₹14,276 crore in March. This reinforces our belief that domestic investors continue to have high levels of confidence in the Indian growth story and also in mutual funds as an effective vehicle for wealth creation,” said G Pradeepkumar, CEO at Union Asset Management.

Debt funds continue to see outflows
Meanwhile, debt funds continue to witness strong outflows at ₹56,884 crore in March, a four-fold jump from ₹13,815 crore outflows in February. In January the outflows were at ₹10,316 crore.

The waning interest in debt funds comes as the Finance Bill proposed to do away with long-term capital gains tax benefits on debt investments. As per the proposed changes in the Finance Bill, investors in debt funds will have to pay tax according to their income slabs. Investors had so far benefited from indexation while calculating long-term capital gains from debt funds but this will no longer be available from April 1, 2023.

"Mutual Funds witnessed significant AUM (assets under management) churn in March 2023 on the back of changes in tax laws. While the cash category saw outflow of nearly ₹65,000 crore, which is typically a year-end phenomenon, the arbitrage funds and funds with maturity of less than 1 year saw outflows of about ₹12,000 crore and about ₹28,000 crore respectively,” said Ajaykumar Gupta, chief business officer at Trust Mutual Fund.

Investors aggressively pulled money out of liquid funds, money market funds, ultra-short-duration funds and overnight funds in March 2023.


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