MF monthly flows – Inflows down but investors not panicking

Inflows including NFOs during February was Rs 29300 crore Vs Rs 40000 crore in January.
Ex-NFOs, inflows were at Rs 27000 crore Vs Rs 36000.

On a normalized basis these inflows of 27000 cr is equivalent to ~ Rs 30000 (normalized to 31 days vs 28 days) resulting into 17% down from 36000 cr. So effectively flows are down only 17% and not 26%.

Flows into midcap, small cap and thematic funds saw lower inflows. Feb vs Jan-> Small cap: Rs 3700 vs Rs 4700, Midcap: Rs 3400 vs Rs 5100, Thematic: Rs 3600 vs Rs 6100.

Largecap and Flexicap remain stable at Rs 2900 vs 3100 (large cap) and Rs 5100 vs 5700 (flexicap). Others like Multicap and Largecap & Midcap also saw marginally lower inflows: Rs 2100 vs Rs 3600 (multicap) and 2700 vs 4100 (largecap & midcap)

SIP inflows remain strong, just marginally down (second month in a row, 500 cr down in 2 months) at Rs 25999 crore Vs Rs 26400 crore. Inflows were Rs 26459 crore in Dec 2024.

Two important takeaways:

Gross redemptions were lowest in February since Nov 2023 at Rs 25100 crore as compared to average redemption amount of Rs 34000 crore in last 1 year. Gross purchases were however significantly lower by 10000 crore from 62k to 52k in February indicating first level of caution among retail investors. Importantly, lower redemptions indicate maturity as there is no panic selling at lower levels despite market being down since last 5 months. (Risk: First dip is always bought while second dip may create panic. Earlier, fall in October 2024 led to higher gross purchases (70k vs 62k) and lower redemption (33k vs 38k). If market fall continues, redemption may increase with continued lower purchases)

Adjusting for lower number of days and NFOs, inflows during the month of February witnessed some moderation (17% lower MoM) but remain healthy against market expectation of sharp fall. Media is reporting 26% decline which is on total flows including NFOs and without adjusting for lower days.