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Flows into equity Mutual Funds slow to 27-month low in December

FE Bureau

Flows into equity mutual funds (MF) stood at Rs 4,442 crore in December 2018, the lowest in the past 27 months, as market volatility increased amid concerns of slowing global growth. Debt funds witnessed an outflow of Rs 1.52 lakh crore in December, data from the Association of Mutual Funds in India (AMFI) showed. All the categories saw outflows of Rs 1.36 lakh crore in the same month.

Other exchange traded funds (ETF) also saw net inflows of `10,978 crore in December because of CPSE ETF. The assets under management (AUM) of the MF industry stood at `22.85 lakh crore. Inflows into balanced funds also slowed down in the past few months and inflows in the month of December stood at `45 crore.

Despite flows into equity funds slowing down, the contribution of systematic investment plans (SIPs) stood at over Rs 8,000 crore in December against Rs 7,985 crore in November. Market participants also say that investments through lump-sums have been slowing down in the last few months due to uncertainty in the markets. In the period from April to December, total contribution of SIPs stood at Rs 68,459 crore. In the last financial year the contribution of SIPs was Rs 67,190 crore while in 2016-17 it was Rs 43,921 crore.

Continued upward trend in monthly SIPs contributions was a bright spot last month and reflects strong adherence to disciplined investment behaviour from the retail investor fraternity, in spite of market volatility, AMFI chief executive NS Venkatesh said.

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Equity funds include equity funds, arbitrage funds and equity linked saving schemes (ELSS). While debt funds includes income schemes, liquid/money market schemes, and gilt schemes. Prior to this, September 2016 had seen lower equity inflows of Rs 3,743 crore. Outflows into debt funds were largely due to the redemption’s from liquid funds which stood at over Rs 1.48 lakh crore in the month of December.

Apart from liquid/money market schemes, income schemes also saw outflows of Rs 3,407 crore, while gilt schemes saw inflows of only `6 crore.

Liquidity in the debt funds have become comfortable after the crises we saw in September. Outflows from the liquid funds can be largely attributed to corporates redeeming money every quarter to book some profits. In the last few months we have seen low participation from banks investing into liquid schemes, said a debt fund manager of a leading fund house.

Slowing down of inflows in equity funds is also largely due to the outflows from the arbitrage funds which was at Rs 2,164 crore. However ELSS and pure equity funds saw inflows of Rs 841 crore and Rs 5,765 crore respectively in the month of December. The average monthly inflows into equity schemes in the period of April-December slowed down at Rs 10,054 crore from Rs 14,200 crore in 2017-18.

I think redemptions were little higher in the month of December. However retail participation continues to remain strong and investors have continued to keep faith in SIPs and that is a positive sign, Radhika Gupta, CEO at Edelweiss Asset Management, said.