MUMBAI : Net inflows into equity mutual fund schemes in June fell by half from the previous month, as many investors chose to book profits when the markets hit record highs.
According to data released by the Association of Mutual Funds in India (Amfi) on Thursday, net inflows into these schemes stood at ₹4,608.75 crore in June, down 50% from ₹9,235.48 crore in May. It was ₹225.25 crore in June 2020.
Redemptions rose to ₹18,974.82 crore in June from ₹14,169.63 crore in the previous month and ₹13,520.03 crore in June last year. “It should be noted that prior to March 2021, the segment witnessed net outflows for eight continuous months. With the net inflows in March, April, May and now June, clearly, investors are gaining conviction back on equity markets,” said Himanshu Srivastava, associate director, manager research, Morningstar India.
According to Srivastava, June’s lower net inflows could also be due to profit-booking amid the market rally.
Domestic institutional investors, including mutual funds, insurance firms and banks, invested ₹7,043.51 crore in stock markets in June, sharply higher than the ₹2,067.23 crore in May. Both Sensex and Nifty indices gained 1% in June, touching record highs. Meanwhile, inflows into monthly systematic investment plans (SIPs) increased slightly to ₹9,155.84 crore in June from ₹8,818.90 crore in May. “Significant improvement on the coronavirus situation, along with improving recovery rate, and the pickup in vaccination drive have provided comfort to investors. Good quarterly results and positive earnings growth outlook over the long-term have alleviated concerns of any severe impact of the second wave of the pandemic on the economy. Additionally, the surge in markets despite challenges also boosted investor sentiment. These factors have prompted them to again allocate assets towards equities,” Srivastava added.
Except for the ELSS category and value/contra fund category, all the equity-oriented categories received net inflows in June. The mid-cap fund category attracted significant investments, with net inflows of ₹1,729.07 crore. However, overall net inflows into equity schemes in the first six months of 2021 disappointed. Data showed net inflows into equity schemes were at ₹4,036.25 crore in January to June of this year, compared to a robust inflow of ₹41,141.50 crore in the same period last year.
“The trend surely is in favour of Indian equities by domestic investors. It is particularly encouraging to witness the good amount of interest in dynamic/asset allocations funds,” said Akhil Chaturvedi, associate director, head of sales and distribution, Motilal Oswal Asset Management Co.
Debt mutual funds saw net outflows of ₹77,225 crore in the six months to June, including open- and close-ended funds. This is mainly on account of fixed maturity plans (FMPs) maturing and the money not flowing back into fresh FMPs.
FMPs are close-ended schemes with a fixed maturity, and investors get back the maturity value when the FMP’s term ends. Low yields have dissuaded mutual fund houses from launching fresh FMPs, experts said. The net outflow in the first half of 2021 is worse than the ₹23,414 crore that flowed out in the first half of 2020 when credit risk fears dominated the market.
“Three years back, FMPs were one of the most preferred avenues in fixed-income investing, as the yields were in the range of 8% CAGR for AAA-rated portfolios. But this calendar year 2021 tells a different story. FMPs in April-June 2021 quarter are negative by more than ₹50,000 crore. In fact, the MF industry is shying from launching FMPs for three years at such low yields as there is hardly any investor appetite for them,” said Chetan Gill, a Chandigarh-based mutual fund distributor.
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