The equity segment was aided by 6 new fund launches in December which garnered INR 6,321 crores
FinTech BizNews Service
Mumbai, January 9, 2024: Melvyn Santarita, Analyst – Manager Research, Morningstar Investment Research India, shares analytical updates in equity and Himanshu Srivastava, Associate Director – Manager Research, Morningstar Investment Research India shares his views on debt segment:
Equity-oriented funds continued to witness net inflows in December 2023, marking it the 34th consecutive month of net inflows and closing 2023 on a good note. The segment witnessed net inflows of INR 16,997 crores in December 2023 which was around 9% higher than November 2023 (INR 15,536.4 crores). The equity segment was also aided by 6 new fund launches in December which garnered INR 6,321 crores.
Among the equity asset class, the Sectoral/Thematic Funds category saw the highest inflows to the tune of INR 6,005.4 crores. The category also saw the launch of 4 new funds in December (Axis India Manufacturing Fund; DSP Banking & Financial Services Fund; Kotak Healthcare Fund; and Quant Commodities Fund) which cumulatively garnered INR 4,259 crores thus helping the category to receive the highest flows.
The small-cap category continues to see robust flows as it witnessed net inflows of INR 3,857.5 crores in December aided by the launch of Motilal Oswal Small Cap Fund which garnered INR 1,226 crores at the NFO stage. The Midcap category, on the other hand, witnessed flows of INR 1,393 crores. Compared to the previous four months (Aug to Nov), there has been a significant dip in flows of the midcap category. This could partially be attributed to investors considering booking profits in this category given the sharp run-up it has witnessed recently. While the small-cap category too saw a fair bit of redemptions during the month, the quantum of purchases was significantly higher.
The large & midcap category saw its third highest flows over a monthly period in December- INR 2,338.8 crores aided by the launch of WhiteOak Capital Large & Mid Cap Fund which garnered INR 836 crores.
The only categories in equity that witnessed net outflows were Large Cap (INR 280.9 crores), Focused (INR 490.9 crores and ELSS (INR 313.5 cores). Flows in the large cap category have been disappointing over the last year relative to other equity categories as investors have perhaps opted to invest in this segment passively via the Index funds and ETF route given their low cost.
Both the midcap and the small-cap indexes have seen a sharp rally over the last 6 months and 1 year. Consequently, investors have also flocked to these categories with ever-increasing flows. Investors should note that while both the midcap and the small-cap categories have the potential to deliver good returns, these categories inherently are volatile with sharp drawdown risks. Therefore, investors should have a long-term time horizon while investing in these categories. Opting to invest in these categories via the SIP route is a good way by which investors can ride the volatility whilst dollar cost averaging over long periods.
Debt
Himanshu Srivastava, Associate Director – Manager Research, Morningstar Investment Research India: Debt-oriented schemes witnessed net outflows for the second consecutive month to the tune of INR 75,559.9 crores in December. The segment witnessed a net outflow of INR 4,706.7 crores in November.
The huge net outflow in December could be attributed to the advance tax requirement that corporates need to meet with it being the quarter end. Expectedly, liquid funds witnessed the highest net outflows during the month.
Other categories with less than one year of maturity also witnessed net outflows. There continues to be uncertainty surrounding the interest rate scenario. While the broader consensus is that the increasing interest rate cycle has peaked, there is a lack of clarity over the timing of the possible reversion in the interest rate scenario. Such a scenario has complicated investment decisions in this segment for investors. Moreover, the robust performance of equity markets has been drawing increased attention from investors, resulting in them shifting from other asset classes towards equities.
Except for categories like short-term, long duration, corporate bond, and Gilt Fund with 10-year constant duration, all the other categories witnessed net outflows.
Some of the categories such as long duration and Gilt Fund with 10-year constant duration have found favour with investors largely in anticipation of a change in interest rate cycle.
