Equity mutual funds go out of favour in June on volatile stock market; what experts say

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Updated: July 9, 2018 12:00:02 PM

Even as we continue to witness heightened volatility in the stock markets, the equity mutual fund inflows dipped by more than 32% in June.

“Ours is a cyclical industry and it would be surprising if there would be no ebbs and flows in the market,” UTI AMC’s Leo Puri said.

Even as we continue to witness heightened volatility in the stock markets, the equity mutual fund inflows dipped by more than 32% in June. According to data released by Association of Mutual Funds in India (AMFI), net inflow into equity mutual fund schemes came in at Rs 8,237 crore in June, down 32% from Rs 12,070 crore in the month of May.

“Ours is a cyclical industry and it would be surprising if there would be no ebbs and flows in the market. After three years of good flows there ought to be consolidation, and there so sign of panic. Redemptions are well within control, and its rationale for investors to take a relook at their portfolio do some asset allocation and take some risk off the table from time to time. I think that what is happening,” Leo Puri of UTI AMC noted, in an interview to CNBC TV18.

Notably, while the overall flows have declined, the SIP inflows continue to remain robust. “The good thing are people are disciplined and staying the course with SIPs. I’m quite confident that the SIP part of flows will remain stable, while the other part could remain volatile due to politics, the broader markets etc. I think we have heatly demand vs supply situation. When we had burgeoning inflows in 2017, we also had equity paper supply coming in through various mechanisms,” Vetri Subramaniam, head of equity funds at UTI AMC told in an interview to CNBC TV18.  

Nilesh Shah of Kotak AMC pointed out that the correction in mini small and midcap stocks could have led to declaration of flows. “There has been significant amount of correction in small, micro and mini cap stocks. That has dampened investor sentiment. So, inflows into mutual funds too have got deferred a little bit,” he told the channel.

According to the expert, the dip has been an on-month dip, while flows continue to remain positive on-year. “Our belief is that year on year mutual fund inflows will continue to remain positive, partly due to SIPs which is bringing in Rs 7,200 crore per month. Where we are actually seeing deceleration is balanced fund flows. The second would be lump sum investments,” Nilesh Shah observed.

Shah noted the downside looks limited for quality large cap stocks, while minicaps and smallcaps will continue to correct. “Going forward, quality and defensive stocks will continue to become more expensive. The midcap and small caps will continue to see downturns. Some quality large cap names will start bottoming out. The upside looks capped due to oil prices, what may be the shape of the government post 2019. However, the largecap downside looks limited as monsoon has been good,” he told the channel.

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