MF July inflow most in 6 years

Written by fe Bureau | Mumbai | Updated: Aug 9 2014, 08:09am hrs
In what should cheer the mutual fund industry, equity schemes saw robust inflows for the second straight month, with inflows in July the highest in six and a half years, reports fe Bureau in Mumbai. Equity schemes saw inflows of R10,815 crore, the highest since January 2008, latest data from industry body Amfi show. Whats more, cumulative three-month inflows from May to July stand at over R20,000 crore. This year MF schemes have seen inflows of R19,750 crore against outflows of R8,708 crore in calendar year 2013. Experts say the market rally in the past few months is getting investors back to the market, which had been subdued for the better part of the last six years.

The benchmark CNX Nifty gained 1.4% in July and is up about 22% in the year to date. In May, the BJP government bagged the largest single-party mandate since 1984, helping the Sensex past the 25,000 levels, driving overseas investors to India and sparking hopes of a new, secular bull run in the country's equity market.

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While the momentum of inflows had started to build from November 2013 onwards, it seems to have become meaningfully entrenched since May 2014 and should herald a sustainable trend moving forward, said a Deutsche Bank Markets Research report.

According to Sunil Singhania, CIO (equity investments) at Reliance MF, the outlook on the economy is a lot more positive and investors are realising that equities is the most promising asset class right now.

Mid-cap and sectoral infra funds have seen an increase in demand in the past two to three months, according to industry officials. Mid-caps tend to perform better than large-caps in a robust economic environment and perform worse than their large-cap peers when the economy does poorly.

Since September last year, the Sensex has returned 36% compared with the BSE MidCap and BSE SmallCap's returns of 69% and 89%, respectively.

What has also helped the industry is the increase in the number of new fund offerings since September last year. The total amount collected from NFOs in 2014 has crossed the R6,000-crore mark, data collated from Value Research show. This number was less than R1,000 crore for the whole of last year. Closed-ended funds, in particular, have gained popularity since September last year, with several top fund houses launching such schemes.

However, retail investors are yet to return to equity schemes in a meaningful way. It's mostly the high net worth individuals that are putting in money, the retail investors will still take some time to come back. That's one reason the equity folio numbers have not gone up substantially, said Chandresh Nigam, CEO, Axis MF.

The MF industry has been struggling ever since entry loads were banned in August 2009, with just 25 months

of net inflows in equity schemes. However, the sentiment seems to have improved of late, with net inflows in every month except one since November last year.

Overall assets under management of the MF industry rose 3.26%, or by R31,737 crore, to R10.06 lakh crore

in July 2014, up from R9.75 lakh crore in June, and

slightly short of the record R10.11 lakh crore in May. The rise in AUM was primarily due to inflows in equity and liquid funds.