Inflows into equity mutual fund schemes in July slowed down to their lowest levels in four months, even as the performance of large-cap and small-cap funds remained just about satisfactory. The average monthly inflows in the first four months of FY2018-19, declined to `10,400 crore from an average monthly of around `14,200 crore seen in 2017-18. The slowdown in inflows into MF schemes has meant that fund houses have cut down buying in the equity markets. Mutual funds invested `3,995 crore in equities in July, the lowest quantum in the last 17 months, data from Securities and Exchange Board of India (Sebi) shows.
Data for a sample of 30 large-cap funds shows that only three large-cap funds have managed to outperform their respective benchmarks for the period of two years ending July 2018. Axis Bluechip Fund was the only fund to outperform its benchmark in both the one and two year-periods. Sundaram Select Focus Fund and JM Core 11 outperformed the benchmark over two years, data from Value Research shows. Only four small-cap funds managed to beat their respective benchmarks for the two-year period. Market participants say that slowing down of inflows into equity funds, including equity linked saving schemes (ELSS), is largely to do with the volatility in the equity markets.
In the month of March this year, inflows in equity mutual were at `6,657 crore, its lowest 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. N S Venkatesh, chief executive at Association of Mutual Funds in India (Amfi) said, “Despite equity markets being volatile, equity inflows stood at around `9,400 crore in the month of July. One of the factors that has contributed to the equity inflows is systematic investment plans (SIPs) and they are doing exceedingly well. We think that, SIP book will continue to grow in near future.”
In the month of July, BSE Sensex gained by 6.2% after two conservatives months of flat returns. Industry participants are confident that as long as SIPs continue to rise, there is no concern for the industry. If we look at the SIP contribution, it is rising every month even as inflows into equity funds have slowed-down. The data from Amfi shows that SIP contribution for the first quarter of current financial year stood at `21,548. In the month of June even as inflows had slowed down into equity funds, SIP contribution was `7,554 crore, the highest seen in the industry. In the month of April and May, contribution was `7,304 and `6,690 crore respectively.
Amfi data also shows that the mutual fund industry had added about 9.83 lakh SIPs accounts each month on an average so far in FY 2018-19, with an average SIP size of about `3,300 per account. Sundeep Sikka, executive director & chief executive officer of Reliance Nippon Life Asset Management said, “There has been slowdown in the inflows of equity funds, but it is largely to do with the high networth individuals (HNIs). I don’t see any challenge going forward as retail money, which stays longer, continuing to see rise in the past few months.” He also added that, new folios are getting created from new cities which is very encouraging signal. The data from Securities and Exchange Board of India (Sebi) shows that equity-oriented folios as on June stood at 5.61 crore.
At the end of the last financial year the equity oriented folios stood at 5.35 crore, according to the the data. Participants in the mutual fund industry say that, money invested from HNIs are ‘hot money’ as they invest lump-sum and exit depending on the performance of equity markets. While retail investors who come mostly through SIPs and stay invested for the longer duration. If we look at the data of retail investors as on June 2018, 41.43% of the them stay invested for more than two years in equity funds. While only 21.59% of high networth individuals (individuals investing `5 lakh and above) stay invested for more than two years.