Morningstar’s Manager Research team has released India Domestic Fund Flows Report 2020 which provides insights into estimated flows, asset trends, and performance for domestic funds focused on the Indian equity and debt market. The flows are estimated from assets and total returns for the month ended April 2020.
Here are some excerpts from the report.
Flows into equity subcategories
Large-cap
Large-cap funds received flows worth Rs 6,513 crore year to date as of April 2020. From January 2020 until March 2020, each month's flows toward large-cap funds continued to rise. However, in April 2020, there was a sharp dip in the flows of approximately 18% compared with March 2020. Despite flows in April 2020 dropping to Rs 1,691 crore, the start to the first quarter of the fiscal year 2021 is still better than the entire first quarter of the fiscal year 2020, where large-cap funds received Rs 1,611 crore.
Mid-cap
The mid-cap category received flows worth Rs 4,980 crore, which was approximately 14% of the overall flows received in equity funds. In each month from January 2020 until March 2020, flows in mid-cap funds were very healthy, conveniently clocking over Rs 1,000 crore every month. However, in April 2020, this number crashed to Rs 497 crore, a sharp 60% fall compared with its previous month.
Small-cap
The small-cap category constitutes around 6% of the total equity AUM as of April 2020. The category had inflows of Rs 3,118 crore on a year-to-date basis as of April 2020, and Rs 2,733 crore during the fourth quarter of fiscal year 2020, an increase of 101% over the previous quarter. During the month of April, the category had flows of 384 crore. The market movements further led to a fall in the overall category AUM from Rs 48,534 crore in December 2019 to Rs 40,482 crore in April 2020--a fall of around 17% on a year-to-date basis as of April 2020.
Multi-cap
Multi-cap funds have held second place within the open-ended equity segment, constituting over 19% of the total equity AUM as of April 2020. Flows into the category have remained positive over the past four quarters. The category experienced inflows amounting to Rs 6,855 crore on a year-to-date basis as of April 2020. Net flows during the third quarter of the fiscal year 2020 amounted to Rs 2004 crore, as opposed to Rs 5,615 crore worth of flows during the fourth quarter of fiscal year 2020, an increase of around 180% on a quarter-over-quarter basis. The category witnessed inflows amounting to Rs 1240 crore during the month of April 2020.
Flows into fixed-income subcategories
Short-Duration
This category has been witnessing positive flows on a quarterly basis since March 2019. However, the category had outflows during the quarter-end March 2020 of Rs 4,059 crore. The outflows continued into the month of April, with the category experiencing an outflow of Rs 2,309 crore, taking the year-to-date outflows as of April to Rs 6,368 crore. The percentage change of flows between the third quarter and the fourth quarter of the fiscal year 2020 stood at negative 145%. This has also been coupled with a loss in AUM terms. For instance, the category AUM stood at Rs 96,378 crore, which reduced to Rs 93,444 crore as of March 2020 and Rs 91,266 crore as of April 2020, a reduction of 5% on a year-to-date basis.
Credit Risk
Investors moved out of credit-risk funds, choosing safety over yields. This resulted in outflows of Rs 7,420 crore in the first calendar quarter, out of which Rs 5,568 crore outflows occurred in March alone. Increasing redemption pressures and liquidity troubles resulted in Franklin Templeton announcing a wind up of six of their funds. This further hampered investor sentiment, resulting in Rs 19,239 crore being redeemed from credit-risk funds in April.
The overall AUM of credit-risk funds as of 30 April 2020, ended at Rs 35,223 crore, down by 44% since the end of last year. While outflows seem to be slowing down, investors continue to be wary of the effects of the lockdown and the resultant economic slowdown on credit-risk funds.
Medium Duration
While credit-risk funds witnessed massive outflows, medium-duration funds weren’t spared either. Many medium-duration funds are run with a measured credit mandate, which resulted in investors redeeming significant sums from medium-term funds, especially in the months of March and April.
Year-to-date April medium-term funds witnessed estimated outflows of RS 8,616 crore, with RS 6,363 crore of outflows in the month of April alone. The overall AUM of medium-duration funds as of 30 April 2020, ended at RS 21,352 crore, down by 30% since the end of last year.
Corporate Bond
The corporate-bond category is among the few categories in the fixed-income segment that has managed to consistently gather flows even during periods where the other categories saw an exodus of funds. Excluding liquid and overnight funds, the corporate-bond category was the second-highest recipient of flows in the fixed-income category with Rs 5,188 crore. Despite seeing outflows in March 2020 of RS 3,791 crore, the April 2020 flows bounced backed to Rs 4,168 crore. The corporate- bond category was among the few categories in the fixed-income segment that saw an uptick in the AUM growth year to date. The year-to-date AUM growth for corporate-bond funds was 9%, with assets worth Rs 86,293 crore.
Banking & PSU
The mandate of the category makes it a relatively safer investment avenue in comparison with some of the other categories that have the flexibility of taking on a higher credit risk as part of the fund. Interestingly, the banking and PSU category continued to get a fair level of inflows as investors chose to park monies into safer options.
The category received flows amounting to Rs 6,494 crore on a year-to-date basis as of April 2020. This is in spite of witnessing an outflow of Rs 66 crore during the quarter-end March 2020, a 100% reduction as compared with the previous quarter. In comparison, the category received flows of RS 16,856 crore during the previous quarter. The AUM on this category has gone up from Rs 70,925 crore in December 2019 to RS 72,476 as of March 2020 and RS 79,242 crore as of April 2020. The year-to-date AUM growth at a category level places it at 12%.
Gilt Funds
Gilt funds, or government securities funds, have gained significant traction from investors over the last couple of months, especially in light of the flight to safety from credit-risk funds. The strong returns posted by gilt funds recently have also been the added lure.
Year to date, the gilt funds category has received Rs 2,593 crore, of which Rs 2,516 crore were received in April 2020 alone.
Gold
Gold as an asset class has time and again demonstrated its ability to outperform most asset classes during extremely volatile periods. Over the last one-year period, gold as an asset class has outperformed all asset classes comfortably by delivering a staggering return of 43%.
This has also led to a lot of flows in the Gold ETFs, which is a recent phenomenon. Scrutinizing the data closely, the year-to-date flows in Gold ETF were Rs 2,221 crore. Of this amount, Rs 1,483 crore comprised the inflows in the month of February while April experienced flows of Rs 730 crore.
