The month of May was divided into two halves for the equity market. In the first half, the leading equity indices were down by 10 per cent whereas, in the second half, they made a remarkable comeback. One of the reasons for such a recovery was that both foreign institutional investors (FIIs) and domestic institutional investors (DIIs) turned net buyer in the market.
Nevertheless, the MF inflows data shows that the investors are slowing down their investments in MF. The month of May 2020 saw one of the lowest inflows into the equity scheme in the last 46 months. For the month of May 2020, equity-dedicated MF schemes saw an inflow of Rs 13,700 crore, which is down by 11.6 per cent on a monthly basis.
From the peak of January 2018, when the inflow was to the tune of Rs 47,200 crore, it is down by almost 70 per cent. Such a fall in gross inflows has led to a decline in the net inflows to Rs 5,257 crore for the month of May 2020, which is a drop of three per cent on yearly basis and 11.6 per cent on a sequential basis. It is also showing a sign of weakness i.e. a drop in the contribution of systematic investment plans (SIPs). For the second successive month, SIP contribution has declined to Rs 8,120 crore, down by three per cent on a monthly basis. The current contribution of SIP is now at the same level as it was in the month of June 2019.
Historically, we have seen that whenever volatility increases in the market, the retail investors shy away from the investment. At times, many of them even stop investing. However, this is the period when they should, in fact, continue with their investment if they have a surplus to invest.