Illustration: Binay Sinha
Net inflow into equity mutual fund
schemes, including tax-saving and arbitrage schemes, rose 28 per cent to Rs106 billion in July, compared to Rs82 billion in June.
The inflow, however, was 27 per cent below the past 12-month average of Rs145 billion, shows data from the Association of Mutual Funds in India (Amfi).
Market experts say inflow had moderated on account of several events over recent months. “Beside market volatility, the dividend distribution tax and scheme recategorisation has made some investors cautious,” said Radhika Gupta, chief executive at Edelweiss MF.
She added that most of the recent slow down in equity inflow is due to lump sum money getting pulled back, while flow through Systematic Investment Plans
(SIPs) remains steady.
“This is not much of a surprise, as the markets are a little volatile, as we are in the middle of the election season. Lump sum money tends to be cyclical,” Gupta said. The industry sees SIP inflow of around Rs75 bn a month, most of which are in the equity segment.
Share prices in July, particularly in the small-cap and mid-cap space, saw a rebound after a sharp fall in the earlier two months. The NSE Midcap 100 and Smallcap 100 indices gained four cent each in July, after falling 15 per cent in May and June. The benchmark Sensex and Nifty rose six per cent, to new record highs. Assets under management for the equity segment rose to Rs 8.3 trillion in July from Rs 7.9 trillion at end-June. “Flow volatility is linked to price volatility. The strong momentum we saw in the past two years went through a hiccup in January. As markets stabilised in July, some investors could have booked profits,” said Kalpen Parekh, president, DSP BlackRock MF.
Gupta said recent equity issuance could have led to some outflow. “The flows must have been taken out for participation in HDFC MF’s public issue and HDFC Bank’s fundraising programme,” she felt.
On an overall basis, the domestic asset management industry recorded net outflow of Rs326 billion as investors took out money from liquid and money market schemes, ahead of the rate hike announcement by the Reserve Bank of India. To contain inflation, the central bank raised its repo rate by 25 basis points, for a second straight time, on August 1.
Money market schemes saw net outflow of Rs311 billion, income funds of Rs79.5 billion and gilt schemes saw outflow of nearly Rs4 billion. Experts say investor behaviour in liquid schemes is not a major reason for concern, as it is driven by short-term requirements. Overall sectoral AUM rose to Rs23.1 trillion, from Rs22.9 trillion at the end of June.