But compared to the industry's record AUM of a little over ₹31 lakh crore in December, the January industry AUM of ₹30.5 lakh crore depicts a monthly decline of over ₹52,345 crore—a reduction of 1.7%. Commenting on the latest set of industry data, AMFI chief executive N. S. Venkatesh points out that January 2021 saw measured maturity–driven redemptions led by smart, goal–based investing and the desire to book profits with equity indices reaching all–time highs.

Venkatesh sees respite in the fact that inflows continued through the systematic investment plan (SIP) route, which saw 8.78 lakh new SIP accounts in January, while the monthly net SIP contribution stood at a little over ₹8,023 crore.

On the debt side, Venkatesh adds that owing to regulatory measures to ease liquidity, and also the stance to hold on to the policy rates, some of the debt categories—such as corporate bond funds, banking and PSU funds, short duration funds—have seen positive flows. “Even the credit risk funds are now moving into positive flows, given that the risk–return dynamics are working in favour of retail investors,” Venkatesh says.

While non-equity AUM forms a major chunk of the industry AUM, it is also not prone to severe volatility which is the case with equity MFs. And the challenges for the fund managers at large get reflected in the daily trade data dispensed by the Securities and Exchange Board of India (SEBI).

Barring January, February, March, and May of 2020, the monthly total of net equity investments of MFs has been negative till February 5 this year. In fact, the total net outflows on the equity front added up to nearly ₹1.08 lakh crore in the eight months of consecutive outflows from June 2020 to January 2021. And, the net equity outflow of ₹5,678 crore, until February 5, pushed the total to a little over ₹1.13 lakh crore.

While speaking to Fortune India, AMFI's Venkatesh reasons that the benchmark indices will keep on hitting new highs and at every level there would be an entry and exit point for investors. “Investors will see different points of profits that they are taking,” he says.

Venkatesh does not deny the fact that there are repeated monthly outflows from equity MFs. However, he explains that investors are riding the wave, which is visible in the outflows from equity funds. Moreover, the fact is that the industry continues to be on a growth path, as there are new entrants in the MF industry. “Investors will keep riding the wave,” Venkatesh says.

For him, investors are going to ride the curve from their entry level to the new level, while the benchmark indices will continue to outperform. And this is something he advocates only as far as the benchmark indices are concerned, since index investors need not have to keep anything in cash. However, MFs keep around 5%-6% of the AUM in cash.

Also, benchmark indices do not have dividend reinvestments. “Such peculiar factors will lead to different returns being generated between actively managed funds and benchmark indices,” Venkatesh says.

When it comes to stability on equity MFs’ mobilisation–redemption–outflow front, Venkatesh is of the view that by April this year there would be some level of improvement. But, the frenzy on the bourses seems to be endless, as new life–highs become frequent, almost becoming a norm.

For the MF industry, the January industry data pack reveals one piece of good news: a single scheme (ICICI Prudential Business Cycle fund) mopped up ₹4,185 crore through the new fund offering (NFO) route. The year 2020 witnessed three months of complete lull, followed by 24 equity NFOs mopping up ₹14,755 crore in total—a growth of 37.3% compared to ₹10,749 crore raised through 37 equity NFOs in 2019.

While the January NFO mop-up works out to a cool 28.4% of the 2020 total of ₹14,755 crore, it also seems to validate Venkatesh’s view that ‘investors will keep riding the wave’.

net equity investments

Investors will keep riding the wave: AMFI