The net inflows into gold exchange-traded funds (ETFs) outpaced collections by active equity mutual fund (MF) schemes for the first time last month, signalling a major shift in investor preferences as price volatility in gold and silver grabbed headlines.
The jump in inflows came amid a surge in volatility in gold and silver last month. Gold prices ended January nearly 17 per cent higher in the international market, while silver surged 39 per cent despite a sharp fall in the last session of the month.
“The surge suggests gold demand remained exceptionally strong, supported by continued investor preference for safe-haven and diversification exposure. Part of the strength likely reflects fresh allocations at the start of the year, as investors rebalance portfolios and add hedges after a volatile period across risk assets,” said Nehal Meshram, senior analyst, Morningstar Investment Research India.
While investors poured record sums into precious metal ETFs, inflows into equity schemes witnessed a decline. At Rs 24,040 crore, net inflows in January were the lowest in seven months.
“The highlight (in January), with no surprise, has been flows in gold and silver ETFs. Investors have diversified their incremental flows from equities into precious metals, given the return profile over recent times,” said Akhil Chaturvedi, executive director and chief business officer, Motilal Oswal AMC.
The decline in net inflows for the second consecutive month was largely driven by a rise in outflows. Investors pulled out Rs 41,639 crore last month, the highest in 18 months.
Gross inflows, while moderating to some extent, remained buoyant, supported by systematic investment plan (SIP) inflows. Equity funds, which garner the bulk of SIP inflows, recorded gross inflows of Rs 65,667 crore last month, 5 per cent lower than the December tally. SIP inflows remained at a record high of Rs 31,002 crore.
In the hybrid space, multi-asset funds continued to garner strong inflows. These schemes, which have been the best-performing diversified MF offering owing to their precious metal exposure, attracted over Rs 10,000 crore of inflows last month.
“Flows into hybrid, multi-asset and passive products — including increased allocations to gold and silver ETFs — suggest a measured approach by investors towards diversification and portfolio balance. Overall, these developments indicate that mutual funds remain a widely used investment avenue, with participation levels holding up across varying market conditions,” said Venkat Chalasani, chief executive, Amfi.
