Balanced funds extend fall to lowest level in 12 months

By: | Published: December 18, 2018 12:14 AM

Inflows into balanced funds extended their decline to their lowest level in the past one year, owing primarily to change in tax structure and correction in the equity markets. In November, the inflows stood at Rs 215 crore, the lowest in one year.

Balanced funds extend fall to lowest level in 12 months

Inflows into balanced funds extended their decline to their lowest level in the past one year, owing primarily to change in tax structure and correction in the equity markets. In November, the inflows stood at Rs 215 crore, the lowest in one year.

In the previous financial year, the balanced funds had seen inflows of over Rs 89,700 crore, while between April and November in this fiscal, the inflows have been only `12,000 crore, data from Association of Mutual Funds in India showed.

“Last year, many balanced funds were sold to investors stating that they will get tax-free dividends every month. While they continue to get the dividends, but due to the correction in the markets, investors are staring at capital loss. I think industry had wrongly positioned and people are now not willing to come in this category,”said a senior official from a leading fund house.

Many market participants also believe that Union finance minister Arun Jaitley’s proposal to introduce a tax on distributed income by equity-oriented mutual funds at 10% in Union Budget 2018-19 also impacted balanced funds in the last few months.

“Many investors have opted to growth option or have exited the balanced funds. Also, correction in the market has led to negative returns for balanced funds and that is also the reason why investors are staying away from this category,” said the marketing head of a top fund house.

In September and October, balanced funds had seen inflows of `731 crore and `519, respectively, the Amfi data showed. The highest inflows into the balanced funds in the current financial year was recorded in April, at `3,500 crore.

Even for the equity funds inflows have been down in the last few months. In November, inflows into equity funds stood at `10,790 crore, lowest in last three months. Even contribution of systematic investment plans in November remained stagnant at `7,985 crore – it was same amount in October.

Inflows into equity funds for October and September stood at `14,783 crore and `11,251 crore, respectively. According to market participants, investments through lump sums have slowed in the last few months and many of them have also started closing their SIPs.

Equity mutual funds include equity, ELSS and arbitrage funds. The average monthly inflows into equity schemes in first eight months fell to `10,756 crore from ` 14,200 crore in 2017-18.

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