Inflows into equity mutual funds jumped to the highest, since at least April 2018, in the month of December 2021. According to latest data released by the Association of Mutual Funds in India, net inflows into equity and equity-linked schemes more-than-doubled over the preceding month to Rs 25,076.7 crore last month, taking the net inflows for the year to Rs 96,669.97 crore. The record numbers assume importance as the inflows remained steady for a 10th straight month, despite the benchmarks seeing a roller coaster ride in December due to the rapid spread of the Omicron-variant and profit-booking by FPIs. So, what’s giving confidence to investors? According to Sunil Subramaniam, managing director of Sundaram MF, the Omicron variant of Covid-19 is a worry for foreign investors, rather than domestic investors. Equity schemes witnessed net inflows between March and December, 2021, and the segment has received a net inflow of Rs 1.1 trillion during this period. Prior to this, such schemes had consistently witnessed outflows from July 2020 to February 2021, losing Rs 46,791 crore. Within the equity categories, MultiCap and Sectoral/Thematic schemes saw the highest net inflows in Dec’21 – led by six NFOs, or New Fund Offers, in these segments. However, investors should be cautious before selecting thematic funds as returns are usually based on trailing basis and may not reflect future prospects, warns Vishal Dhawan, founder and CEO at Plan Ahead Wealth Advisors. Moreover, such all-embracing investment in mutual funds warrants caution. According to analysts at ICICI Direct: No fund outperforms across all investment horizons.
Every fund performs in cycles. Hence, investors should be more cautious while investing in a best performing fund. Given this, Subramaniam says investors should keep their risk appetite and goals in mind before selecting any mutual fund.