SIPs continue to hold despite market volatility, higher inflows to debt funds in April

Chennai Despite the volatility in the market, there were huge inflows into the mutual fund debt schemes in April 2023 as investors of systematic investment plan (SIP) continued to make investments, as gleaned from the data released by the Association of Mutual Funds in India (AMFI), said experts.

The inflows into SIPs were Rs 13,727.63 crore in April 2023. The number of SIP accounts were marginally up, standing at 6.42 crore for April 2023 compared to 6.36 crore in March 2023, SAMCO Mutual Fund CEO Viraj Gandhi said.

Geojit Financial Services' Chief Investment Strategist Dr V.K. Vijayakumar said: "The healthiest trend in inflows is the resilience of SIPs in spite of high market volatility. This is in contrast to the sharp decline in active trading accounts in the last nine months."

Gandhi said the equity linked schemes showed quiet subdued inflows of just Rs 6,480 crores, down 68 per cent QoQ and 59 per cent YoY, despite broader indices moving up, and this "was quite surprising". During the period, Nifty was up by 3.92 per cent while the broader Nifty 500 was up by 4.57 per cent.

Notably, midcap and smallcap schemes showed YoY growth of 15 per cent and 27 per cent respectively, which was quite healthy compared to overall equity linked schemes which de-grew significantly, he added.

According to Vijayakumar, April witnessed a 700 point rally in Nifty after continuous decline in the first three months of 2023. This rally triggered some profit booking in large-cap funds. This explains the sharp dip in large-cap inflows in April compared to March.

It is important to understand that April inflows are normally subdued after high activity in March in response to year-end activity, Vijayakumar said.

As to the inflows into the debt-oriented schemes, Gandhi said there was 95 per cent growth logging Rs 106,677 crore which enabled the industry to cross Rs 41 lakh crore of assets under management (AUM) for the first time.

This segment attracting such inflows despite long term capital gain being taken away in the previous month is a strong indication of what is lying ahead.

The current interest rate cycle showing signs of peaking out and inflation data showing some relief, must be the reason for such high traffic towards debt-oriented schemes, Gandhi added.

According to Vijayakumar, debt mutual funds are likely to witness continued decline in inflows since the tax benefits from indexation are not available from April 1 onwards.