Retail monthly flows into equity-oriented mutual funds surged to the highest this financial year driven by strong flows through systematic investment plans (SIPs). While liquid funds saw some flows trickling back after the huge outflow in the previous month, income funds continued to witness outflows on higher interest rates and fears of the IL&FS crisis spilling over to the sector.
Net inflows increased by Rs 35,500 crore to take the total asset under management to Rs 22.24 lakh crore.
Equity funds saw inflows of Rs 12,622 crore, the highest in the financial year, topping May’s inflow of Rs 11,350 crore. Investors pumped in Rs 7,985 crore through SIPs in equity funds, an all-time monthly high. This was Rs 258 crore more than September’s Rs 7,727 crore, despite the sharp correction in the equity markets with the Nifty touching the lowest point of 10,005 of this calendar year.
“Investors have used the correction in stock prices to add equity in their portfolio and increase their long-term allocation to this asset class,” said Swarup Mohanty, CEO, Mirae Asset Mutual Fund. Distributors said equity mutual funds saw strong inflows from both metro as well as nonmetro centres. Given a mere 1.8 crore mutual fund investors in India, penetration is likely to increase sharply as many new investors enter equities, an asset class that is known to beat inflation in the long-term, they added.
The income fund category saw outflows of Rs 37,642 crore, while liquid funds saw inflows of Rs 55, 300 crore. In the previous month, income funds had seen outflows of Rs 32,500 crore, while liquid funds saw Rs 1.5 lakh crore in outflows.
While money is selectively trickling back to liquid funds and overnight funds of reputed fund houses, investors continue to stay away from duration funds. “Hardening of interest rates is one reason why investors are staying away from income funds,” said NS Venkatesh, chief executive officer of AMFI.
Corporate investors continued to be wary of debt mutual funds in the wake of the ongoing IL&FS crisis and the contagion effect it could have. They continue to closely monitor the developments in the debt markets.
“Short- and medium-term debt funds have seen outflows as fear of failure was large,” says A Balasubramaniam, CEO, Aditya Birla Sunlife Mutual Fund.
Of the Rs 1.5 lakh crore outflows in liquid funds in September, only a third or Rs 55,300 crore has come back. Due to this, many corporate investors preferred to play it safe and opted for bank deposits rather than mutual funds.
Source: Economic Times