Inflows into equity funds in August slipped to an 18-month low with the broader stock markets underperforming for eight months now.
With 70% of companies with a market capitalisation of Rs 1,000 crore in the red since January 1, investors have had very little to cheer about. Of the 794 companies in this universe, 297 have lost more than 20% of their value while over a fourth of the companies have lost more than 25%. The Nifty MidCap Index has given up 7.4% since the start of the year and 65% of its constituents have lost value. The Nifty Small Cap Index has suffered a bruising 17.3% since January and 81% of its members have seen a fall in prices.
The amount at Rs 5,923 crore includes equity, equity linked saving scheme and arbitrage funds, data from Association of Mutual Funds in India (Amfi) shows. This compares with flows of Rs 10,585 crore in July and Rs 8,237 crore in June. The average monthly inflows for the first five months of FY 2018-19 declined to Rs 10,200 crore as against average monthly of around Rs 14,200 crore seen in 2017-18. In the first five months of 2018-19, inflows in equity funds stood at around Rs 51,300 crore.
Radhika Gupta, CEO at Edelweiss Asset Management conceded that flows have slowed down. “The first part is that the lump-sum flows are uncertain as equity markets have remained volatile. This is because we are close to the elections and crude oil prices are going up,” gupta observed. She said the month on month volatility is expected and not surprising.
“Having said that, flows through systematic investment plans (SIPs) continue to remain strong which is long term retail money and we should take comfort that every month around `7,500 crore is coming through SIPs,” Gupta said.
Despite inflows in equity funds slowing down, SIP contribution have seen steady rise in the past few months. In August, SIP contribution stood at over Rs 7,600 crore and in the current financial year the contribution is in excess of Rs 36,700 crore. In the last financial year, SIP contribution was around Rs 67,190 crore, shows the data from Amfi.
G Pradeepkumar, CEO at Union Asset Management Company, says: “I think with some uncertainty in mid and small cap segments, many investors are postponing their bulk investments. There is general feeling that markets will correct and they can invest at lower levels.” He also added that, but SIPs flows will continue to remain strong as investors have started coming in for the long term and are doing goal based investments.
The data from Amfi also shows that in the month of August, mutual fund industry saw net inflows of Rs 1.74 lakh crore. Income funds saw outflows of Rs 6,520 crore, while liquid scheme saw inflows of Rs 1.71 lakh crore in August. “I think corporates have looked at investing at the shorter end of the curve and preferred not to be in the longer end of the curve in the rising rate scenario and that could be one of the reason for such strong flows in liquid funds,” added Gupta. Asset under management (AUM) of mutual fund industry for the first time crossed Rs 25 lakh crore and stood at Rs 25.20 lakh crore at the end of August.