Buoyant equity markets and renewed sentiment on the political front pushed equity funds to register their best inflows in the last ten years. In the 11 months of financial year 2014-15, equity mutual funds saw inflows of over R62,500 crore. Active participation from retail investors and a plethora of new fund offers (NFOs) contributed to the huge inflows.
In FY14-15, till February, equity schemes (which include equity and equity linked saving schemes) saw inflows of R62,548 crore. The last time equity funds saw such smart flows were during the 2007-08 bull market, when they had mopped up R46,993 crore.
S Naren, CIO at ICICI Prudential Asset Management Company (AMC) says, “Once the positive returns started coming in, investors also came into equity funds. Apart from that, sentiment improved after the elections and there was fall in crude prices which also helped the market to deliver strong returns.” In the last one year the benchmark Sensex has given over 24.5% returns.
Several market participants also believe that launch of close ended schemes by many fund houses helped to increase equity inflows in 2014-15. Around 70 new equity schemes were launched by the different fund houses out of which over 45 were close ended in nature which collected approximately R8,500 crore.
Over the last few years equity mutual funds had seen continuous net redemptions as Indian equity markets turned volatile. In the year 2012-13 and 2013-14, equity funds saw net outflows of R14,231 crore and R9,268 crore respectively. Many market players also believe that steps taken by market regulator, Securities and Exchange Board of India (Sebi) to incentivise distributors helped fund houses to penetrate into several semi urban and rural parts of India.
Himanshu Vyapak, deputy CEO at Reliance AMC says, “In the last one year there was overall optimism in the market, which attracted many investors towards equity funds. Also, there were many investors who had allocated money into gold and real estate which have not done well compared to equity. This prompted many investors to look into equity funds.” He believes going forward, market might see some consolidation but retail investors would continue to stay invested in equity funds.