New Delhi: Hybrid mutual funds attracted investors in January and clocked an influx of Rs 20,634 crore in the month, owing to the funds gaining popularity as an alternative investment tool after changes in the taxation laws for debt funds. The overall inflow in the category touched Rs 1.21 lakh crore in the April-Jan period in the current fiscal year (FY24).
The monthly inflow in January stood 37 per cent higher than Rs 15,009 crore seen in the previous month in FY24, reported PTI. At the same time, hybrid schemes registered an outflow in the reviewing month in the preceding fiscal year. Notably, the schemes have become increasingly popular since April 2023, following a change in the taxation laws for debt funds.
Earlier, the hybrid funds category witnessed a net withdrawal of Rs 12,372 crore in March 2023. Official data from the Association of Mutual Funds in India (Amfi) revealed that hybrid schemes saw investments primarily in two categories, namely, arbitrage funds and multi-asset allocation funds. From the overall inflow in January, arbitrage funds clocked an influx of Rs 10,608 crore, while multi-asset allocation funds attracted Rs 7,080 crore. Notably, hybrid funds represent the mutual fund schemes that generally invest in a combination of equity and debt securities and often in other asset classes like gold.
Elaborating on the investment trend, Feroze Azeez, Deputy CEO, Anand Rathi Wealth Ltd, said, “Moreover, around 50 per cent to 70 per cent of the allocation in the hybrid category has been going towards arbitrage funds in the last six months. The main reason for the increase in flows in this category is that they are being looked at as an alternative post-change in tax laws. Currently, arbitrage funds are sitting at a spread of around 8 per cent making it an attractive investment opportunity, especially on a post-tax basis.”
Investors prefer the multi-asset category for the simple diversification it offers the investors. The segment saw an addition of 3.36 lakh hybrid folios in Jan 2024, accounting for a share of 7.7 per cent in the total folios of 16.95 crore.
Azeez added that hybrid funds are lucrative for investors with a moderate or low-risk profile, as they also lower the fluctuations associated with indulging in equity markets and give stability to the investors.
According to the new taxation rules, applicable from April 1, 2023, the debt mutual funds held for over three years are not liable to enjoy indexation benefits. Indexation considers the account inflation during the period a mutual fund unit is held and gradually increases the buying price of the asset and this helps lower the taxes.
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