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According to the Latest Mutual Fund Report by Motilal Oswal Financial Services Ltd., the lump sum gross inflows into the Equity segment, excluding NFOs, stood at INR179b in Oct’22 – the lowest since Nov’20. MOFSL checks indicates that the slowdown has been on account of: a) large HNIs waiting for a better entry point as the equity market is close to a new high, 2) weakness in flows from lower-end customers in rural areas, and 3) reduced NFO activity by large AMCs in the Equity segment.

Redemptions in the Equity segment have been steady. As seen in past cycles, redemptions gather momentum when there is a sharp rally in the equity market and the share of equity in the portfolio allocation models of wealth managers rises above certain thresholds (based on the customer risk appetite).

MOFSL interacts with a few large Mutual Fund distributors (having an AUM in excess of INR10b) and institutional sales representatives to gauge customer behavior in the current environment. Strong recovery in the Equity market and expectations of interest rate hikes by the RBI play a meaningful role in gauging customer interest for investing in Mutual Funds. Over the past couple of months, a few major trends have emerged: a) resurgence of NFOs in 2QFY23 after a hiatus, b) steady trends in overall AUM, c) sustained high outflows from the Debt segment, and d) new highs in monthly SIP inflows. MOFSL remains positive on CAMS and IIFLWAM in the AMC space, with a Buy rating on both stocks.

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