MUTUAL FUND FLOWS IN JUNE 2024 QUARTER – MACRO VIEW
While monthly mutual fund flow have their own high frequency implications, it is also instructive to look at the quarterly flows each quarter. This is more relevant for debt funds, which typically go through cycles of redemptions every 3 months, so a quarterly look gives a more secular view. Let us begin with the macro picture of how the fund flows looked like in the quarter ended June 2024. The total gross flows into open ended funds in the June 2024 quarter stood at ₹31.62 Trillion while the redemptions of open ended funds in the quarter stood at ₹28.53 Trillion, resulting in net inflows into open ended funds overall to the tune of ₹3.08 Trillion. Close-ended funds, once again, saw negative flows in the quarter to the tune of ₹1,946 Crore on a net basis, although it hardly made any meaningful difference to the overall flows in the June 2024 quarter. In fact, June 2024 quarter saw net inflows into debt funds after a gap of two quarters, which is good news and shows that even apart from the quarter end treasury desk pressures, there is interest building in debt funds. Here is a quick tabular dekko at the macro picture.
| Macro picture of flows in mutual funds in June 2024 quarter | ||||
| Fund Category | Funds Mobilized | Redemptions | Net Flows | Net AUM (Jun-24) |
| Open Ended Funds | ₹31,61,770 Crore | ₹28,53,353 Crore | ₹3,08,417 Crore | ₹60,89,273 Crore |
| Close Ended Funds | ₹60 Crore | ₹2,006 Crore | ₹(1,946) Crore | ₹26,309 Crore |
| Mutual Funds Overall | ₹31,61,830 Crore | ₹28,55,359 Crore | ₹3,06,471 Crore | ₹61,15,582 Crore |
Data Source: AMFI
As of the close of the June 2024 quarter, the net AUM of Indian mutual funds stood at ₹61.16 Crore as compared to ₹53.40 Trillion as of the March 2024 quarter, ₹50.78 Trillion as of December 2023 quarter, and ₹46.58 Trillion as of the September 2023 quarter. That is what you can call steady growth!. This growth in AUM at rapid clip can be partly attributed to genuine flows triggered by treasury desks into debt funds and SIPs / NFOs into equity, hybrid, and passive funds. However, this must also be largely attributed to the spike in equity valuations in tandem with the Nifty and Sensex scaling dizzy heights. By default, debt fund flows tend to be erratic since they are largely driven by treasury flows; and these treasuries have quarterly pressure in the form of advance tax payouts.
DEBT FUND FLOWS IN JUNE 2024 QUARTER
| Flows into Debt Funds in the Jun-24 quarter (AMFI) | |||
| Funds Mobilized | Redemptions | Net Flow | Net AUM as of Jun-24 |
| ₹27.43 Trillion | ₹26.18 Trillion | ₹1.25 Trillion | ₹14.13 Trillion |
Data Source: AMFI
For a change, the Indian debt funds saw net inflows of ₹1.25 Trillion in the June 2024 quarter, which is in contrast to the outflows in the March 2024 and the December 2023 quarter. Incidentally, in the 6 quarters prior to the June 2023 quarter, debt funds had seen consistent net outflows. The net inflows in the June 2024 quarter were despite the regular redemptions in March. One new trend was that investors showed a tendency to lock themselves into long-dated instruments in the June 2024 quarter as is evident from the net quarterly inflows into long duration funds and corporate bond funds.
Let us look at key flow drivers and start with inflows? Needless to say, the flows were driven in the June 2024 quarter by the debt funds at the short end of the yield curve. Money Market Funds saw net inflows in the quarter of ₹51,946 Crore, while Liquid Funds saw net inflows of ₹48,271 Crore, and ultra short duration funds and low duration funds saw net inflows of ₹10,425 Crore and ₹10,418 Crore respectively. Other than these big inflows, gilt funds saw net inflows of ₹3,826 Crore and Overnight Funds saw net inflows of ₹2,697 Crore in the June 2024 quarter. Gilt funds did see some interest in the quarter from institutions on expectations that the RBI may take up a pre-emptive rate cut in the August policy.
In a quarter when net inflows were to the tune of ₹1.25 Trillion, the outflow categories were bound to be limited. Banking & PSU Funds saw net outflows of (₹3,186 Crore), Medium Duration Funds (₹1,426 Crore), Credit Risk Funds (₹1,378 Crore), and 10-Year Gilt Funds (₹339 Crore). Clearly, the number of funds seeing redemptions and even the intensity of redemptions were much lower in the June 2024 quarter, compared to the March 2024 quarter. The overall undertone of debt funds was more encouraging this quarter.
Total AUM of all active debt funds at the close of the June 2024 quarter bounced sharply to ₹14.13 Trillion; compared to ₹12.62 Trillion, ₹12.91 Trillion, and ₹13.05 Trillion in the previous three sequential quarters. The share of debt fund AUM in overall open-ended MF AUM stands at 23.11% as of the close of June 2024 quarter; compared to 23.64%, 25.42%, and 28.19% in the previous three sequential quarters. The AUM share of debt funds has come down in the June quarter despite the net inflows as equity and other categories grew much more aggressively in terms of AUM.
COLOUR OF EQUITY FUND FLOWS IN JUNE 2024 QUARTER
| Flows into Equity Funds in the Jun-24 quarter (AMFI) | |||
| Funds Mobilized | Redemptions | Net Flow | Net AUM as of Jun-24 |
| ₹2,07,784 Crore | ₹1,13,562 Crore | ₹94,222 Crore | ₹27.68 Trillion |
Data Source: AMFI
Net flows into equity funds in the June 2024 quarter stood at ₹94,222 Crore; compared to ₹71,280 Crore, ₹52,491 Crore, and ₹41,963 Crore in previous three sequential quarters. However, one must remember that nearly ₹75,000 Crore of net inflows came in the months of May and June 2024; with both months setting all-time records in terms of equity fund flows. The enthusiasm in the equity fund flows even at higher levels has been sustained by a spike in SIP flow. In fact, in the current quarter, SIP flows stayed above ₹20,000 Crore in each of the 3 months. Also, the NFOs are picking up traction, with big NFO monies raised in May and June 2024. The NFO flows are especially robust across categories like sectoral and thematic funds. Amidst the series of warnings by SEBI to AMCs; the flows into small cap and mid-cap funds had slowed in the interim; but now the momentum appears to be back.
The positive flows into equity funds were affirmative in the June 2024 quarter in all the classes of equity funds; except focused funds and ELSS funds that saw outflows. Sectoral & Thematic funds led the way with quarterly net flows of ₹46,731 Crore (nearly double of March 2024 quarter). This was followed by multi-cap/flexi-cap funds at ₹18,464 Crore, large & mid cap funds at ₹7,948 Crore, small cap funds at ₹7,197 Crore, Mid-Cap Funds ₹6,927 Crore, Value funds at ₹5,418 Crore, and large cap funds at ₹1,991 Crore. Net flows in the quarter were negative in focused funds and ELSS funds while they were subdued in the rest of the equity fund categories.
The total AUM of equity funds at the end of the June 2024 quarter stood at ₹27.68 Trillion; compared to ₹23.49 Trillion in the March 2024 quarter, and ₹21.79 Trillion as of December 2023 quarter. The market share of equity fund AUM in overall AUM stood at 45.26%; compared to 43.99% as of March 2024, 42.92% as of December 2023, and 41.21% as of September 2023. On the equity funds front, 2 trends were underscored in the quarter. Firstly, the alpha hunting in small and mid-cap funds is back with a bang. Secondly, investors are now searching for alpha in sectoral and thematic funds rather than only mid-cap and small cap funds. However, this is not a very safe trend with indices at lifetime highs.
HYBRID FUND FLOWS IN JUNE 2024 QUARTER
| Flows into Hybrid Funds in the Jun-24 quarter (AMFI) | |||
| Funds Mobilized | Redemptions | Net Flow | Net AUM as of Jun-24 |
| ₹1,30,418 Crore | ₹82,813 Crore | ₹47,605 Crore | ₹8.60 Trillion |
Data Source: AMFI
In June 2024 quarter, hybrid fund saw robust net inflows at ₹47,605 Crore, compared to ₹44,964 Crore in the March 2024 quarter. In our above definition of hybrid funds, we have also added the solution funds to give a more comprehensive picture. Like in the last two quarters, the flows into arbitrage funds continued to lead the way, but others like multi-asset allocation funds, Dynamic Allocation Funds and Equity Savings Fund are also playing catch-up in the net flows game. If you look at the returns of arbitrage funds in recent months, it is clearing beating the liquid funds by a margin; amidst the volatility in the equity markets. That is one reason why there is a good deal of HNI funds flowing into arbitrage funds for the short term. After all, the favourable tax treatment of arbitrage funds is an added bonus for the HNI investors. NFOs have been the driver of net flows into multi-asset allocation funds, which is the new flavour among the hybrid funds. There is a larger story to the Multi asset allocation funds. However, the growing attractiveness of multi-allocation funds is matched by the rising enthusiasm for BAFs and equity savings funds. Broadly, investors are seriously looking for asset allocation opportunities that gets a handle on risk, apart from offering above market returns.
How did the inflows into specific categories of hybrid funds look like in June 2024 quarter. Arbitrage Funds led the way with net inflows of ₹30,496 Crore in the June 2024 quarter. Multi-asset allocation funds saw meaningful net inflows of ₹9,926 Crore in the June 2024 quarter followed by significant inflows of ₹3,268 Crore into Dynamic Allocation Funds (BAFs) and inflows of ₹3,147 Crore into equity savings funds. Overall, 5 out of the 6 categories of hybrid funds saw net inflows in the June 2024 quarter; while the two categories of solution funds also saw marginal net inflows in the June 2024 quarter. Total AUM of hybrid funds plus solution funds at the end of June 2024 quarter stood at ₹8.60 Trillion; compared to ₹7.67 Trillion in the March 2024 quarter. AUM share of hybrid funds plus solution funds in the overall AUM as of the close of June 2024 stood at 14.06%; compared to 14.36% and 13.86% in the previous two sequential quarters.
PASSIVE FUND FLOWS IN JUNE 2024 QUARTER
| Flows into Passive Funds in the Jun-24 quarter (AMFI) | |||
| Funds Mobilized | Redemptions | Net Flow | Net AUM as of Jun-24 |
| ₹81,127 Crore | ₹39,365 Crore | ₹41,762 Crore | ₹10.48 Trillion |
Data Source: AMFI
The legendary founder of Vanguard Funds, Jack Bogle once said, “Why to look for a needle in a haystack, when you can buy the entire haystack.” That had been the driving force for Indian investors to battle problems like market uncertainty and fund manager kurtosis. However, with the massive rally in the Nifty and Sensex in 2023, that was almost forgotten. In the last few months, the Indian investors are once again discovering the magic of passive fund like index funds and index ETFs, which is good. Let us move to the Q1-FY24 data.
Passive funds had a relatively strong quarter in the June 2024 quarter with net inflows of ₹41,762 Crore. This is sharply higher than the net flows figure in the March 2024 quarter of ₹26,532 Crore; which, in itself, was twice the flows in the December 2023 quarter. Clearly, the momentum is coming back in favour of passive funds. Here is how the various categories of passive funds saw traction in the June 2024 quarter. There was strong positive traction in index ETFs which saw net inflows of ₹25,571 Crore while index funds saw inflows of ₹16,086 Crore and gold ETFs saw net inflows of ₹1,158 Crore during the quarter ended June 2024. FOFs investing overseas saw net outflows of ₹1,053 Crore in the June 2024 quarter. In terms of AUM share, the passive funds had an AUM share of 17.14% as of the June 2024 quarter; compared to 17.50% and 17.21% in last 2 sequential quarters.
WHAT WE READ FROM THE AMFI QUARTERLY REPORT?
To sum it up, the June 2024 quarter, had some interesting takeaways for investors.
- Debt funds saw positive quarterly flows in the June 2204 quarter, after two quarters of net outflows. However, the debt funds flows are still too vulnerable to treasury flows, with a larger narrative still elusive.
- In the equity funds category, alpha hunting in small and mid-cap funds is back after the interim regulatory jitters. More importantly, the investors are starting to prefer sectoral and thematic funds; something which is not a very positive trend at dizzy index heights.
- Finally, NFOs are picking up in a big way, although the quick reading is that the NFOs in the market are dominated by the passive index categories and the smart beta categories.