The firm’s Monthly Macro Grid Chartbook showed total net flows across asset classes nearly halved to ₹73,842 crore in February from ₹1.64 lakh crore in January, reflecting a broad cooling after elevated January activity.
Gold-led correction dents commodity appetite
Commodity inflows saw the steepest reversal among all asset classes, falling 89% month-on-month to ₹5,774 crore. The decline followed a correction in gold and a sharp dip in silver prices after January’s surge.
The report attributed the fall to fading momentum in precious metals, which had earlier driven strong retail participation. As prices corrected, investor interest waned, leading to the sharpest single-month drop in flows across segments.
Money market flows normalise after seasonal spike
Flows into money market instruments also moderated, declining 45% to ₹42,970 crore. January had seen an elevated spike driven by quarter-end positioning, and February’s numbers indicate a return to more typical levels.
Despite the drop, institutional preference for cash and short-term instruments remained relatively elevated, suggesting continued caution in broader markets.
Equity inflows hold, but sentiment turns selective
Equity flows proved more resilient, declining 19% to ₹42,017 crore. However, the nature of flows shifted as investors turned more selective amid market volatility.
Large-cap and broad market funds saw moderation, while mid-cap and small-cap segments bucked the trend with higher inflows, indicating dip-buying in beaten-down pockets.
The report noted that a broad-based domestic equity correction—averaging a 7.4% decline over the month—made investors more cautious. This was reflected in outflows from dynamic strategies and certain thematic categories, including PSU-focused funds.
At the same time, some contrarian trends emerged. Technology funds attracted inflows despite weak returns during the month, while BFSI funds also turned positive. Factor-based strategies, particularly quality-focused funds, saw increased interest, aided by new fund launches.
Fixed income outflows persist despite marginal improvement
Fixed income continued to see net outflows, though the pace slightly eased to ₹16,919 crore. Government bonds showed relative resilience, with outflows narrowing compared to January.
However, the report highlighted that core outflows in the segment remain entrenched, pointing to ongoing investor preference shifts.
Mean reversion after January extremes
According to Vallum Capital, February marked a phase of “mean reversion” following January’s extremes. The cooling of the gold-driven commodity rally and normalization in money market flows drove the overall decline.
At the same time, emerging trends such as dip-buying in mid- and small-cap equities and selective interest in sectors like technology suggest that investors are repositioning rather than exiting risk assets entirely.
