Despite Dip In Momentum, Equity Still Has Lion’s Share Of Open-Ended MFs, Says Report

Open-ended equity mutual funds formed about 38 per cent of the total open-ended mutual fund space, while at 64.98 per cent market share, large-cap focussed exchange traded funds (ETF) formed the largest share of ETF assets under management (AUM) in Q2 FY23, according to a report by Morningstar. At present, India has 11 gold ETFs and 141 other ETFs.

In the industry specific trends, as of September 2022, large-cap and flexi-cap mutual funds accounted for 16 per cent share, followed by mid-cap at 12 per cent.

SBI Mutual Fund witnessed the biggest inflow among asset management companies (AMCs) in the open-ended and ETF fund category at Rs 10,266 crore in Q2 FY 2022-2023.

“SBI was aided by strong net inflows in its ETF (SBI Nifty 50 ETF- Rs 8,143 crores and SBI S&P BSE Sensex ETF- Rs 5,961 crore) during the quarter,” says Morningstar in its Domestic Flows Report.

Here are some other investment trends observed in the report.

Open-ended MF schemes saw inflow and closed-end schemes saw outflow: The second quarter of FY23 saw an inflow of Rs 46,783 crore in various open-ended mutual funds, while closed-end schemes saw a net outflow of Rs 495 crore.

In the closed-end mutual fund space, there are various investment vehicles, such as the fixed income category, growth, interval, and others.

According to Morningstar, the net positive inflows from the first two months of the quarter led to the overall net flows for the quarter, and thus it became a positive number.

In July 2022, there was a net inflow of Rs 23,063 crore, and in August 2022, there was a net inflow of Rs 63,843 crore. But in September 2022, there was a net outflow of Rs 40,124 crore.

Equity investing momentum is dropping along with fixed income: Though the net flows into open-ended equity funds have been positive over the past six quarters (Q2 FY23 saw net flows into equity funds at Rs 29,118 crore), but when compared with the last quarter, it is down by 42 per cent.

Net flows in fixed-income funds have been quite volatile, too. Q2 FY23 saw net outflows from fixed income mutual funds at Rs 11,278. This is the fourth consecutive quarter where there has been a net outflow in fixed income mutual funds.

Equities still form more than a third of AUM of open-ended schemes: Compared to last quarter, the total AUM of all open-ended equity funds as of September 2022 was up by 14 per cent at Rs 14,63,800 crore.

Open-ended equity funds formed about 38 per cent of the total open-ended mutual fund space, and a part of this sharp rise in assets is attributable to the rally in equity market valuation. For instance,

the S&P BSE 100 TR rose by 10.19 per cent, while BSE Midcap and BSE Small-cap rose by 14.99 per cent and 15.29 per cent, respectively, during the quarter ended September 2022.

Solution-oriented and other schemes never saw quarterly outflow: Solution-oriented mutual fund schemes and other categories never witnessed a quarter of outflows, and this was despite volatile market conditions. For the quarter ended September 2022, these categories (solutions and other) saw a net inflow of Rs 417 crore and Rs 42,963 crore, respectively.

Weight-wise, both the large-cap and flexi-cap categories continue to lead the AUM split with approximately 16 per cent each, followed by mid-cap at 12 per cent.