After the market regulator introduced flexi-cap systems and fund companies aligned their multi-cap systems, investors are investing more and more money in this category. In July, fund houses absorbed Rs 11,508 crore into flexi-cap funds. Of this amount, the new fund offer (NFO) from ICICI Prudential Mutual Fund mobilized Rs 9,808 crore. Nippon India Flexi-Cap Fund raised Rs 2,860 crore via NFO this month.
Assets under management of flexi cap funds soared to Rs 1.93 lakh crore as improving investor sentiment, driven by surging markets and falling interest rates, attracted new investors looking for high returns.
Mitigate the risks
Flexi-cap funds are dynamic, open-ended equity programs investing in large, mid and small cap stocks in order to diversify their investment portfolio. The minimum investment in equities and equity-related instruments will be 65% of total assets. These funds help mitigate risk and reduce portfolio volatility. The introduction of flex-cap funds by the Securities and Exchange Board of India (Sebi) last year was a great relief for multi-cap fund managers, as the regulator’s September 2020 directive mandated a minimum allocation of 25% to large and mid-cap funds. and small cap stocks each.
After the introduction of the flexi-cap system, most multi-cap funds have now switched to this category to retain their original portfolio characteristics. It helps fund managers invest freely in all market capitalizations, assess fund allocation and change companies and industries based on performance from time to time. Experts say investors should stay invested in a flexi-cap fund for 3-5 years and the risk-return component of flexi-cap funds is well balanced as fund managers take advantage of the investment opportunities of capitalization stock market.
Equity Mutual Fund Earnings
Retail investors continue to invest in equity mutual funds as net inflows of Rs 22,584 crore in July were the highest since April 2019. Inflows into equity funds were helped by new offerings of funds which absorbed Rs 13,709 crore during the month. In fact, the trend of positive inflows on equity UCITS continued for the fifth consecutive month in July.
Arun Kumar, head of research at FundsIndia, says many investors who have racked up larger savings over the past year due to lower spending and have stayed on the sidelines are coming back. “The decline of Wave 2, strong recent equity returns and market stability despite Wave 2 have contributed to investor comfort and confidence,” he said.
Systematic investment plan (SIP) flows have steadily increased. The SIP contribution in July was 9,609 crore rupees, an all-time high. The industry recorded 23.79 lakh of new SIPs during the month, the highest record on record. The sector’s total SIP accounts rose to 4.17 crore as of July 31 of this year, from 3.27 crore in the same month last year, indicating that retail investors are participating in the rally in stocks by the through mutual funds.
Arbitrage funds remain favorable
Arbitrage funds reported net inflows of Rs 14,924 crore in July, a multi-year high. In June, this category paid off Rs 9,059 crore. Between January and July, he paid off Rs 49,106 crore. Arbitrage funds exploit the price differential between stocks in the spot market and in the equity futures market and generate returns by exploiting the price differential between the two when they buy in the spot market and sell on the futures market. Fund managers are able to effectively manage medium-term stock market volatility in these funds. Arbitrage funds invest around 65% of the portfolio in stocks and are treated like equity funds for tax purposes. The remainder is invested in the money market or in debt securities.