February saw severe volatility in almost every asset market -- bond yields spiked, equities crashed, crude oil prices jumped, gold was trading at a premium, and other asset classes too experienced a volatile pricing phenomenon.
Due to this high volatility, the overall Assets Under Management (AUM) of the mutual fund industry dropped to Rs 37.56 lakh crore from Rs 38.01 lakh crore in January, according to the monthly data released by the Association of Mutual Funds of India (Amfi).
However, despite the uncertain situation and volatility in equity markets, equity-oriented mutual funds attracted more investment.
There was a net inflow into equity-oriented funds of Rs 19,705 crore in February as against Rs 14,888 crore in January.
This suggests that investors increased their equity allocation to take advantage of the falling prices during the market-wide crash due to the Russia-Ukraine war.
In the equity segment, the highest inflow was in the flexi cap funds at Rs 3,873.56 crore, followed by sectoral/thematic funds at Rs 3,441.00 crore.
The funds that received the least net inflow were dividend yield funds, at Rs 156.50 crore.
Investors were also seen booking profits in various debt funds and moving them into liquid and overnight funds.
Liquid funds saw the highest inflow at Rs 40,273.31 crore, followed by overnight funds at Rs 1,296 crore.
Short-term and corporate bond funds were the top categories to see the highest outflows at Rs 12,091.88 crore and Rs 10,218.74 crore, respectively.
Overall, debt funds saw a net outflow of Rs 8,274 crore in February 2022.
Crude Oil Causes Concern
N.S. Venkatesh, CEO, Amfi, said the AUM of debt mutual fund schemes had fallen mainly due to geopolitical issues and uncertainty regarding how and when the Russia-Ukraine war would end.
He also said the Indian economy is much better equipped to handle this crisis when compared to other economies. Moreover, India has sufficient forex reserves.
However, the rising crude oil prices are a cause for concern and could impact India’s economy, putting pressure on the 6 per cent yearly inflation target.
At present, the inflation rate is within the target range of the central bank, but if crude continues to climb higher, it may pose a problem, he said.
