Inflows in equity mutual funds sink to 10-month low in August

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Mumbai: Retail investors were cautious in allocating money to equity mutual funds in August as the sharp rebound in the stock market saw valuations jump, seeing flows into equity mutual funds in August slowing to Rs 6,120 crore compared from July’s Rs 8,898 crore, according to data released by Association of Mutual funds in India (AMFI). This is the lowest inflow equity funds have witnessed in the last 10 months.

However, flows into mutual funds through the monthly systematic investment plans (SIPs) rose to Rs 12,693 crore, much higher than the previous month’s Rs 12,140 crore, suggesting investors were more comfortable spreading their bets on equities after the recent gains.

Mark to market gains in equity mutual funds along with inflows of Rs 49,164 crore into debt mutual funds saw the industry’s assets under management touch an all-time high of Rs 39.53 lakh crore.

“Equity investors are being conservative in allocating lumpsum money due to the sharp recent up and weak global data points,” said Swarup Mohanty, CEO, Mirae Asset Management.

Flexicap funds saw the highest inflow of Rs 2,100 crore primarily due to new fund offers (NFOs) from two asset management companies. Sectoral funds saw outflows of Rs 1,267 crore as investors booked profits from niche themes.

Midcap and small cap funds saw inflows of Rs 1,479 crore and Rs 1260 crore, respectively, in August.

In the fixed income space, liquid funds saw inflows of Rs 50,095 crore, while ultra-short-term funds and money market funds saw inflows of Rs 6,372 crore and Rs 5,929 crore, respectively. “After the rate hikes, investors with a time frame of up to a year are coming back to debt funds as they can earn more than bank fixed deposits,” said Anand Vardarajan, business head, Tata Mutual Fund.

Investors could earn between 5.5% and 5.7% in liquid funds and up to 6.25% in money market funds. Dynamic asset allocation funds, which invest in a mix of debt and equity based on market valuations, saw inflows of Rs 851 crore, while aggressive hybrid funds, which allocate 65-75% of their portfolio to equities, saw inflows of Rs 745 crore.

Arbitrage funds saw outflows for the third consecutive month of Rs 8,548 crore due to poor returns from the category over the past one year. Distributors believe investors are shifting money to ultra-short term and liquid funds as they believe they can earn more there compared to arbitrage funds.

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