The mutual fund industry witnessed an outflow of ₹3,900 crore in the March quarter against an inflow of ₹81,915 crore in the December quarter, largely due to a net outflow of ₹1.18-lakh crore from the fixed income schemes in March.

The open-ended funds — which consist of equity, fixed income, allocation, solution oriented and others — started off the quarter with inflows of ₹35,224 crore and ₹31,294 crore in January and February, respectively, but ended off with net outflows of ₹70,418 crore in March.

This resulted in the cumulative flows turning negative, according to Morningstar data.

Gopal Kavalireddi, Head of Research, Fyers, observed that the outflow in the March quarter was largely due to outflow from fixed income schemes. In this regard, he said India’s economic growth will be impacted by factors such as slower global growth, high commodity prices, fall in income levels, high fuel prices and elevated inflation, besides the risk of government increasing subsidies and reducing capital expenditure.

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FIIs have sold over $22 billion of Indian equities over the last six months, owing to expensive valuations, US Fed rate hikes, and subdued global economic conditions. These outflows could continue, albeit at a moderated pace, if conditions related to inflation and the economy continue in the same trend, Kavalireddi said.

However, irrespective of current economic uncertainty, equities still remain the best way to build wealth over the long term.

Equity inflow trend

Inflows into equity mutual fund schemes were up 50 per cent in the March quarter at ₹63,057 crore against ₹41,906 crore logged in the December quarter despite the turbulence in equity market.

Cumulatively, net flows into equity funds last fiscal was at ₹1.64-lakh crore, a sharp increase compared to an outflow of ₹25,966 crore in the previous year. The total assets under management of equity funds was up 39 per cent in March at ₹13.65-lakh crore against ₹9.79-lakh crore recorded in the same period last year.

Abhinav Angirish, Founder, Investonline.in, said investors who had reduced their positions must remember that the goal of risk management is not to generate cash but to redeploy it as and when new opportunities present themselves.

Market behaviour may seem illogical when seen over a short period but considering the long-term perspective now is the perfect time to start investing as Indian economy will be in much better form in the next 5-10 years, he added.

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