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Equity fund inflows hit 31-month low in April, debt funds see outflows

Chirag Madia

Inflows into equity mutual funds in April stood at Rs 4,608.74 crore, the lowest in the last 31 months, shows data from Association of Mutual Funds in India (Amfi). Market participants attribute continuous fall in equity inflows to weak fund performance and nervousness ahead of election results. If we look at debt side than, recent crises in the debt funds have led to outflows of Rs 17,644.42 crore from the fixed maturity plans in April.

Swarup Mohanty, chief executive officer of Mirae Asset Global Investments (India), said, I think slowdown in equity inflows is a combination of two factors, one being investors little nervous ahead of election results and weak returns of equity funds in the last two years.

In September 2016, equity funds had seen inflows of Rs 3,743 crore. Equity funds includes equity and equity linked saving schemes (ELSS). The data from Value Research shows that, large-cap fund category have given returns of 3.77%, while small-cap and mid-cap category have given returns of -17.02% and -11.05% in the last one year. The broader indices, Sensex have given returns of 6.3% in the last one year.

However, investors are continuing with their investments through systematic investment plans (SIPs). The data from Amfi shows that in April, the contribution of SIPs stood at over Rs 8,238 crore. Market participants also say that investments through lumpsums have been slowing down in the last few months, due to uncertainty in the markets. In the last financial year, total contribution of SIPs stood at Rs 92,693 crore. In the financial year 2017-18, the contribution of SIPs was Rs 67,190 crore while in 2016-17, it was Rs 43,921 crore. Among equity schemes, large and mid-cap funds saw outflows of Rs 20.50 crore, while mid-cap and small-cap schemes saw inflows of Rs 491.01 crore and Rs 955.83 crore, respectively.

The data from Amfi shows that open ended debt oriented schemes saw inflows of Rs 1.20 lakh crore, which includes liquid funds witnessing inflows of Rs 89,778.43 crore. However, credit risk funds and medium duration funds saw outflows of Rs 1,253.28 crore and Rs 530.89 crore, respectively, in April. The close-ended debt oriented schemes saw outflows of Rs 18,949.76 crore in April.

When investors get their maturity amount in FMPs, a good portion of that money gets re-invested in FMPs. But now with current liquidity crisis and expectations of higher rates, investors are conserving the liquidity, says Dwijendra Srivastava, CIO-Debt at Sundaram Asset Management Company. Apart from FMPS, even capital protection schemes have seen outflows of Rs 314.72 crore.

NS Venkatesh, CEO, Amfi, said, Overall nervousness in the markets owing to credit events, rating downgrades and defaults, coupled with global trade imbalance, and uncertainty over outcome of general elections has led to investors getting into wait-and-watch mode. We expect investors would return in a big way, as corporate earnings improve further and once the general elections related uncertainty and global headwinds recede over the next few months. Mutual fund industry saw inflows of over Rs 1 lakh crore, while average net assets under management for April stood at Rs 25.27 lakh crore.