Amidst the highly volatile market conditions that exist today, equity funds have witnessed inflows, while debt funds have witnessed massive outflows. The AMFI data has revealed that inflow and outflow for March have recorded an 18 percent fall in its AUM. While the figures stood at INR 27.22 lakh crores in February, they have fallen to INR 22.26 lakh crores in March. This is the highest monthly fall recorded as yet in the financial year of 2019 to 2020.
While the general overall fall in the market is being held responsible for the decline in the portfolio value, skeptical investors are pulling out their money. This is large because they fear that the further crash in the market has also contributed to this incident.
However, quite interestingly, the market has seen some widely contrasting trends when it comes to the asset class levels.
The equity category has seen the highest net inflow in this financial year- a net inflow of INR 11,723 crore in March. Leaving aside dividend yielding funds, each of the nine different categories has witnessed a net inflow, since different investors have also taken part in the market to take advantage of this fall in the market.
Multi-cap funds have observed a major net inflow of Rs 2268 crores, which is followed by the net inflow of INR 2060 crores as observed by large-cap funds and finally, focused funds, which saw a total net inflow of INR 1994 crores.
This financial year has also witnessed an increase in the net inflow of tax saving ELSS funds, as compared to the previous months of the same year. The net flow for March this year was INR 1551 crore, which is 78 percent greater than that of February, which was INR 871 crores.
Investors, however, are quite doubtful of their choices presently and are avoiding all high-risk equity segments, for instance, the small caps. This is precisely why the small-cap segment, which had always been an attractive investment zone, has seen a fall in its net inflows from INR 1498 crores in February to a meager INR 163 crores in March. In the ongoing financial year, this is the lowest monthly inflow that has been recorded.
Collectively, debt funds have seen massive outflows. As per the data by the latest AMFI, a total of INR 1.95 lakh crores have been lost on a net basis. 12 out of 16 categories across the open-ended debt fund spectrum have seen outflows, largely led by liquid funds. Liquid funds do generally witness negative outflows at the end of every quarter, because of advance tax payments.
Investors are taking flights to safety amid such situations, which is also evident by the rising net flows in overnight funds. These are believed to be the most liquid and the safest of all debt schemes and have collected INR 26,000 crores of net flows. This is the highest that this category has recorded in any month in the financial year. As a result, the AUM of these schemes has increased about seven times, to INR 80,174 crores, over the last twelve months.
Long duration, gilt, and gilt with 10-year constant maturity have also reported positive net flows in the debt categories, having collected net inflows of INR 57 crore, INR 747 crore, and INR 84 crore, respectively.
In conclusion, it can be stated that investors should stick to their investment and asset allocation plans. Due to the drop in the industry AUM, they should not drop their long term investment plans.