Equity mutual fund (MF) schemes saw net inflows of just Rs 240 crore in June, recording their worst month in over four years, even as the markets clocked gains of over 7 per cent during the month.
Interestingly, gold exchange-traded funds garnered higher flows (Rs 494 crore) than equity schemes in June, underscoring risk-aversion among MF investors.
According to industry experts, this could be attributed to redemptions by institutional investors and individual investors amid economic disruptions caused by the Covid-19 pandemic.
“Redemptions from institutional investors and sizeable outflows from large- and multi-cap funds have skewed the data. There has also been a flight to safety among individual investors with the markets showing a rebound after a sharp correction,” said Swarup Mohanty, chief executive officer at Mirae Asset Management Company (AMC).
From the March 23 lows, the markets have bounced back with gains of over 40 per cent. Until that point, the Sensex was down 37 per cent in year-to-date terms.
Multi-cap funds saw outflows of Rs 777 crore in June, while large-cap funds saw net outflows of Rs 212 crore.
June was the worst month for equity flows since March 2016, when equity schemes last saw negative net flows (Rs 1,370 crore). Compared to the last 12-month average of Rs 7,103 crore, the June flows were down 96 per cent. Flows were 95 per cent lower than the previous month.
Systematic investment plans (SIPs), which are used by investors for monthly investments, saw a dip of another 2.4 per cent (Rs 196 crore) in June on a month-on-month basis. The SIP book is now down 8 per cent from March peak of Rs 8,641 crore.
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“The dip in SIP contribution can be attributed to cash-flow issues at investor level amid the pandemic. Also, the MF industry has started to offer an SIP pause facility to investors, which could also have had an impact on the SIP flows,” said N S Venkatesh, chief executive of the Association of Mutual Funds in India.
G Pradeepkumar, chief executive officer at Union AMC, said slowing SIP contribution was a worrying sign, but not unexpected, in the current environment.
Compared to the previous month, equity schemes saw a 75 per cent jump in redemptions. “Volatility in the markets had made investors nervous. While the markets have seen a strong bounce-back, future volatility cannot be ruled out as the Covid-19 pandemic has led to an overall economic uncertainty,” said a fund manager.
While mid- and small-cap funds saw positive flows, industry participants say redemptions could pick up in these categories as a lot of investors are stuck with long-held investments in several schemes.
Among hybrid schemes, balanced hybrid funds saw outflows of Rs 1,704 crore, while balanced advantage fund saw outflows of Rs 941 crore. Experts say balance hybrids can see more outflows as these were mis-sold by some quarters on assurance of steady monthly payouts through dividends.
Industry experts say there has also been an increased interest in directly investing into stocks in recent months, which can be seen from the spike in the number of demat accounts opened at several broking houses.
On the debt front, liquid funds saw net outflows of Rs 44,226 crore on the back of quarter-end withdrawal for tax obligations. Low-duration and short-duration schemes saw inflows of Rs 12,235 crore and Rs 8,323 crore, respectively. The money market fund saw net flows of Rs 4,685 crore.
Investors continued to show risk-aversion as corporate bond fund and banking & PSU funds garnered sizeable flows. Corporate bond funds received flows to the tune of Rs 10,737 crore, while banking & PSU funds got flows Rs 5,477 crore in June.