Equity mutual fund inflows dropped 26 pc in February amid market turbulence

The net equity mutual fund inflow in February witnessed a sharp decline of 26 per cent compared to the previous month, amounting to Rs 29,303.34 crore, according to data released by the Association of Mutual Funds of India (AMFI) on 12 March.

Despite the fall, the inflow managed to remain in positive territory for the 48th consecutive month, showcasing the continued interest in equity investments despite market headwinds.

The drop in inflows comes amid a significant market correction during February, with the benchmark BSE Sensex plummeting 5.55 percent and Nifty 50 declining by 5.89 per cent. The slide was driven by global uncertainties, weak corporate earnings, and a sluggish economic environment. In January, equity mutual fund inflows had already shown a marginal decline of 3.6 per cent to Rs 39,687.78 crore over the previous month.

Amid the ongoing volatility, mutual fund investors adopted a cautious approach, with high-risk small-cap and mid-cap funds witnessing the steepest declines. Inflows into small-cap funds fell 34.9 per cent to Rs 3,722.46 crore, while mid-cap fund inflows dropped 33.8 per cent to Rs 3,406.95 crore. In contrast, large-cap fund inflows experienced a relatively modest dip of 6.4 percent, totalling Rs 2,866 crore.

Among the various equity fund categories, focused funds emerged as an exception, recording a notable 64.4 per cent surge in inflows to Rs 1,287.72 crore. This stands in stark contrast to other categories, all of which saw a dip in inflows during the month.

The fixed-income segment also faced challenges, with debt mutual funds recording a net outflow of Rs 6,525.56 crore in February, compared to a significant net inflow of Rs 1.28 lakh crore in January.

Ultra Short Duration Funds saw outflows of Rs 4,281.02 crore, while Money Market Funds reported net selling of Rs 3,275.97 crore. On a positive note, Liquid Funds attracted net inflows of Rs 4,976.97 crore, and Corporate Bond Funds recorded net buying of Rs 1,064.84 crore.

Due to mark-to-market losses in the equity segment, the overall assets under management (AUM) of the Indian mutual fund industry dropped by 4.04 per cent during February to Rs 64.53 lakh crore from Rs 67.25 lakh crore in the previous month.

As market uncertainties continue to weigh on investor sentiment, the mutual fund industry faces the challenge of maintaining positive momentum. Fund managers are likely to tread cautiously, navigating the complex global and domestic economic landscape.