Equity mutual funds witnessed a slowdown in inflows in June amid increased volatility in the broader equity markets.
Equity mutual funds witnessed a slowdown in inflows in June amid increased volatility in the broader equity markets. The equity mutual funds saw net inflows of Rs 9,660 crore in June, against inflows worth Rs 11,171 crore and Rs 11,350 crore in April and May respectively, data from Association of Mutual Funds in India (Amfi) showed. In the financial year 2017-18, these funds saw net inflows of over Rs 1.7 lakh crore, with a monthly average of around Rs 14,200 crore. However, the monthly average this year so far has come down to Rs 10,727 crore.
Market participants say that the decline in inflows in equity funds, which also include equity-linked saving schemes (ELSS) and arbitrage funds, was largely due to the uncertainty in equity markets. In March this year, inflows in equity mutual funds were at Rs 6,657 crore — the lowest level in 13 months — as investors redeemed funds to avoid the tax on long-term capital gains (LTCG) that was effective for transactions done from April 1.
Jimmy Patel, MD and CEO at Quantum Asset Management Company, said: “Sentiments have turned weak due to the volatile equity markets. With the lack of positive trigger going forward, we expect inflows in equity funds to remain range-bound.” However, industry participants feel that flows into systematic investment plans (SIPs) continue to remain strong even as there has been some SIPs cancellation in the past three months. In the last fiscal, investors flocked into equity mutual funds with buoyant equity markets and SIP contribution was around Rs 67,190 crore in 2017-18 as against Rs 43,921 in 2016-17.
The Amfi data also showed that in June, the mutual funds industry saw net inflows of Rs 46,475 crore. Income funds saw outflows of Rs 23,119 crore, while liquid scheme also saw inflows of Rs 52,104 crore in the month of June. While balanced fund continued to see slowdown in their inflows as for the month of June it stood at Rs 1,482 crore.
“In the past few years fund houses were selling balanced funds and giving out monthly dividends. Due to this practice assets of balanced funds surged, but with announcement of taxing dividends at 10% in the last budget, inflows into balanced funds have reduced to large extent,” said a top official from the leading fund house. In the last financial year, balanced funds had seen net inflows of Rs 89,757 crore as against Rs 36,610 seen in the financial year 2016-17.