Retail Investors Adjust Strategies Amid Market Volatility

MUMBAI: Retail investors have shown resilience in the mutual fund market during February, continuing their investments despite a backdrop of volatility. However, recent data from the Association of Mutual Funds in India (AMFI) indicates a shift in investment patterns, with a notable decrease in Systematic Investment Plan (SIP) contributions and equity inflows. This trend reflects changing investor preferences as they navigate uncertain market conditions.

SIP Contributions Dip Slightly

In February, gross inflows through SIPs fell to ₹25,999 crore, down from ₹26,400 crore in January. Despite this decline, AMFI Chief Venkat Chalasani noted that February typically experiences a drop in SIP flows. On a year-over-year basis, however, SIP contributions have surged by nearly 36%, rising from ₹19,187 crore in February 2024. This indicates that while monthly contributions have dipped, the overall trend remains positive, showcasing the continued popularity of SIPs among retail investors.

Equity Inflows and AUM Decline

The latest figures reveal a 26% month-on-month decrease in equity inflows, although this marks the 48th consecutive month of net inflows into equity funds. The overall assets under management (AUM) in the mutual fund industry fell by 4%, dropping to approximately ₹64.5 lakh crore from ₹67.3 lakh crore in January. Chalasani attributed this decline primarily to mark-to-market losses in equity funds, highlighting the impact of market fluctuations on investor portfolios.

Shift Towards Flexicap Funds

As market volatility persists, retail investors are adjusting their strategies, moving away from small and midcap funds in favor of flexicap funds. In February, small cap schemes attracted ₹3,722 crore, a significant drop from ₹5,721 crore in January, reflecting a 35% decline. Similarly, midcap schemes saw inflows decrease from ₹5,148 crore to ₹3,407 crore, a 34% drop. In contrast, flexicap funds experienced a smaller decline, with net inflows of ₹5,104 crore in February compared to ₹5,698 crore in January, indicating a shift in investor confidence towards more diversified fund options.

Gold ETFs Maintain Strong Annual Inflows

Gold exchange-traded funds (ETFs) continue to attract significant interest from investors, although monthly inflows have slowed. February saw net inflows of ₹1,980 crore, down from ₹3,751 crore in January. However, this figure represents a substantial increase from ₹997 crore in February 2024, showcasing the growing appeal of gold as a safe-haven asset amid market uncertainty. Investors appear to be leveraging gold ETFs as a hedge against volatility, further diversifying their portfolios in challenging economic conditions.

Observer Voice is the one stop site for National, International news, Sports, Editor’s Choice, Art/culture contents, Quotes and much more. We also cover historical contents. Historical contents includes World History, Indian History, and what happened today. The website also covers Entertainment across the India and World.

Follow Us on Twitter, Instagram, Facebook, & LinkedIn