Equity mutual fund (MF) schemes have raked in Rs 46,200 crore in net lump-sum inflows in the past six months (ended February 2024), almost thrice the inflow in the previous six-month period.
In February alone, investors poured Rs 11,500 crore through the lump-sum route, the highest since March 2022, according to data from the Association of Mutual Funds in India.
MF executives say that investors are taking advantage of choppy market conditions to deploy additional money into equities.
“Lump-sum inflows are typically discretionary, and investors often choose to deploy them during market corrections.
"This approach is logical and distinct from systematic investment plans (SIPs), which involve a commitment to invest from future cash flows rather than an existing kitty,” said Neelesh Surana, chief investment officer at Mirae Asset Investment Managers (India).
“It is difficult to pinpoint the reasons as the flows depend on various factors, given the diverse investor base.
"However, what we have generally seen is that lump sum inflows gain momentum when the market corrects,” said B Gopkumar, managing director and chief executive officer of Axis MF.
The equity market has been volatile in recent months, with the largecap index Nifty moving into a consolidation phase.
The index swung 2.4 per cent last month and registered over a 0.5 per cent decline in three sessions.
The National Stock Exchange Nifty Smallcap 100 Index was even more volatile as the regulator showed concerns over the growing valuations in the small and midcap space.
The index declined over 4 percent on February 12. It was down over 1 percent on two other occasions.
At the same time, net inflows through the SIP route were comparatively muted.
The net SIP inflows stood at Rs 38,210 crore in the September 2023–February 2024 period, 22 per cent higher than the March 2023–August 2023 collection.
Net SIP inflows are derived by excluding the outflows from SIP accounts from the gross SIP inflows.
While SIP flows are considered agnostic to market conditions, lump sum investments are highly correlated with the prevailing market sentiment.
Lump sum inflows, unlike SIPs, are mostly opportunistic in nature due to the timing involved in such investments, say industry executives.
They add that the majority of such flows come from high networth individuals.
“Timing the market is not always the right approach but makes sense if deployment happens when markets are in a reasonable valuation zone, and it is in a staggered manner as
when the market falls,” said Surana.
“Investors who have overallocated to smallcaps can also look to rebalance their portfolio to bring it back in line with their asset allocation framework.
"We believe that the ideal core funds for the long term now should be either ‘multicap’ or ‘large and midcap’ category,” he added.
The surge in lump sum inflows boosted the net inflows into equity schemes to Rs 26,860 crore in February, the highest since March 2022.
Apart from the Rs 11,500 crore inflows through lump sums, the rest of the inflows came through SIPs and new fund offerings (NFOs).
While SIPs contributed Rs 6,470 crore, NFOs brought in Rs 11,470 crore.
