What five important lessons the AMFI nos. signify for the stock markets

What five important lessons the AMFI nos. signify for the stock markets

According to AMFI statistics, small and midcap funds had robust inflows after withdrawals in March 2024.

The statistics showed reductions in Fund of Funds and Gold ETFs.

According to updated statistics from the Association of Mutual Funds of India (AMFI), mutual fund SIPs surpassed the previous month's total of Rs 19,270.96 crore in April 2024, crossing the 20,000 crore milestone for the first time. Furthermore, substantial inflows were seen in small and midcap funds, which saw outflows in March 2024.

What impact do the most recent figures have on the stock markets? Moneycontrol outlines the five most important findings from the most recent data.

1. SIPs at an elevated

Systematic Investment Plans, or SIPs, saw an all-time high of Rs 20,400 crore in inflows as of March 2024, up 6% month over month (MoM). Between April 2023 and April 2024, SIP inflows increased by almost 48%, while between April 2022 and April 2024, they increased by roughly 72%. Chief Business Officer (CBO) of ITI Mutual Fund Mayukh Datta said this is a "ongoing phenomenon, where people are starting, continuing, and increasing their SIPs."

According to him, SIPs now account for over 20% of the assets under management (AUM) in the sector.

2. The lowest equity inflows in four months, at Rs 18,917 crore

The month's equity inflows dropped by over 16 percent, to their lowest level in four months. Compared to March's inflows of Rs 22,633 crore and February 2024's inflows of around Rs 26,865 crore, April's inflows were Rs 18,917 crore. The drop in stock flows, in the opinion of Deepak Jasani, Head of Retail Research at HDFC Securities, is indicative of investor anxiety due to the high index levels and approaching elections.

"After the elections are over or the index adjusts itself, this may be corrected. Also, investors would feel more at ease with the high index levels if the profits of Nifty businesses begin to increase," he said.

3. Demand for small and midcap stocks

Smallcap funds saw withdrawals in March 2024, marking the first such event in 30 months, as a result of regulatory attention to small and midcap funds. The category saw net inflows of Rs 2,209 crore in April 2024, compared to outflows of Rs 94.17 crore in March.

According to Shweta Rajani, Head of Mutual Funds at Anand Rathi Wealth Limited, the recent gains in smallcap stocks in April are not shocking. "The stress tests in March and April caused some anxiety, but people can now see that there is nothing to worry about," the speaker said. "Right now, there is also not much valuation concern in the small and midcap space."

But, Gaurav Dua, Head of Capital Market Strategy at Sharekhan by BNP Paribas, issues a warning, pointing out that the preference for smallcap funds emphasizes ordinary investors' propensity to pursue returns. "Many investors are not cognisant of the risk associated with an assertive as well as skewed investment strategy comparison to a well-balanced approach," he said.

4. Bigcaps increase, but they still behind small and midcap inflows.

Largecap funds had a dramatic drop in inflows in April, coming in at Rs 358 crore as opposed to Rs 2,128 crore in March 2024.

Market analysts were hopeful that largecaps will be the center of attention this year notwithstanding a slowing in the small and midcap surge after a difficult FY24. Fund flow is not necessarily the leading signal, according to Siddarth Bhamre, Head of Institutional Research at Asit C. Mehta Investments, since many largecaps have comfortable prices in comparison to midcaps.

"Valuations are often not responsive to changes in money flow. Therefore, what succeeds and what fails is not just dependent on cash flows. Considering the market's structure and prices, I believe it would be wiser to invest in largecap stocks as opposed to midcap stocks," he said.

It's not like money isn't coming into largecaps at all, Rajani continued. She clarifies that investors are placing their money in other asset classes, such as dividend yield funds, which are exposed to largecaps.

5. For the first time in a year, gold ETFs are declining.

The AMFI data shows reductions in Fund of Funds (FoF) and gold ETFs. The demand for gold ETFs over the last six months has resulted in outflows of Rs 395.69 crore. The majority of fund managers think that this is not indicative of the market or investor mood, but rather may be the consequence of profit-booking.

Ghazal Jain, the fund manager at Quantum Mutual Fund, told Moneycontrol that it may be because some investors have decided to adjust their portfolios or book gains since their allocation to gold must have grown unbalanced given the recent price surge.

"We can see investors coming back to Gold ETFs in the months that follow, as and when we see another pullback in prices, which can be good entry points as gold’s longer-term outlook looks constructive," she said.