PSU mutual funds see Rs 4,498 crore outflow in March: Report

PSU mutual funds witnessed an outflow of Rs 4,498 crore in March against an outflow of Rs 5,389 crore in February, indicating a total change of Rs 891 crore, according to a report by Vallum Capital.

The report further highlighted that the total AUM of PSU funds was recorded at Rs 47,896 crore, and in the last month, these funds gave a return of 3.7%. The gain offered in the longer horizon was in double-digits. In the last three years, these funds posted a gain of 30.8%, whereas in the last five years and 10 years, these funds rallied 28.7% and 18.2%, respectively.

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The consumption theme saw an outflow of Rs 351 crore in March. The other sectors or themes to witness outflows in March were Auto, technology, conglomerate theme, innovation theme, transportation and logistics, service, business cycle, ESG, sector leaders, BFSI, energy, and MNC.

Manufacturing, Infrastructure, and Defence attracted fresh inflows — capex/defence themes regaining favour.

According to the report, fresh money is flowing into Manufacturing (+Rs 373 crore, a Rs 634 crore swing), Infrastructure (+Rs 279 crore), Defence (+Rs 132 crore), and Pharma (+Rs 191 crore) — a clear pivot toward domestic capex and healthcare as the preferred 2026 framework.
On factors, offensive plays like Alpha (+8.5%), Momentum (+7.5%), and Growth (+6.5%) led the 1-month bounce, but over longer horizons, Quality and Low Volatility are holding up better, suggesting the rally is not yet broadly trusted.Total net asset-level flows reversed from Rs 73,589 cr in February to Rs 2,20,797 crore in March. There was a massive outflow from the Money Market (Rs 1.95 lakh crore in March), while Fixed Income continued to see sustained outflows, suggesting redemption pressure or sensitivity to interest rates. Inflows in commodities remained positive but subdued, suggesting cooling investor interest as momentum in precious metals stabilised.

Fund flows reveal the true investor sentiment. Money is rotating into safety — large-cap funds absorbed Rs 28,558 Cr in March inflows, a Rs 19,242 Cr surge from February. Flexi-cap and mid-cap saw steady additions. Meanwhile, arbitrage funds haemorrhaged Rs 22,182 Cr in outflows (a Rs 22,713 Cr reversal), and dynamic strategies bled capital.

Sitting atop the YTD Indian asset quilt, gold was up 16%, and Silver was up 16.45% — both outperforming every equity category year-to-date.

The dominant global theme is a weakening US dollar and a rotation away from American exceptionalism. The INR depreciated against virtually every major currency in April — Euro +4.1%, Brazilian Real +7.0%, Australian Dollar +3.2% vs INR in just one month. Over one year, the INR has lost 8–13% against most developed market currencies.

The report also highlighted that Country ETF returns confirm the rotation. Brazil (+17.1% in 1M, +76% in 1Y), Poland (+16.8%), South Korea (+16.1%), and Taiwan (+14.2%) are leading global markets.

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India’s INDA ETF, at +3.7% in 1M and still -3% over 1 year, is participating in the EM recovery but not leading it. Emerging Markets ex China are meaningfully outperforming, with the Global Miners ETF up +12.7% in 1M and +117% over 1 year, underlining the commodity Supercycle running alongside this rotation.

On thematic ETFs, the global winner is unambiguous — semiconductors and AI infrastructure. Invesco Semiconductors and First Trust Nasdaq Semiconductor ETFs both returned +22–23% in 1 month, while South Korea’s AI Power Infrastructure ETF surged +22.4%. Cybersecurity and Chinese tech were the laggards.

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