Unsettled equity markets have not discouraged investors from pouring money into equity mutual funds. In the current calendar year, equity funds have witnessed net inflows of more than Rs 92,000 crore, the highest in ten years.
Positive returns from equity funds, coupled with changing approach of retail investors and success of investors awareness programmes, can be attributed to such strong flows into equity funds.
Industry participants say gone are the days when retail investors used to enter the markets at peak and exit at bottom. Milind Barve, MD at HDFC Asset Management Company (AMC), said: “I think credit should be given to both distributors as well as the mutual fund industry to expand their reach across India and attract new set of investors. The industry has been positioning equity funds as a three-five year product. Even if we look at investor behaviour, they are not reacting to any corrections in the markets and are continuing to invest for medium to long term.”
According to the industry officials, around Rs 2,500 crore flows into equity funds every month only through systematic investment plan (SIPs).
Even in 2014 calendar year, equity funds (which include equity, equity-linked saving schemes and other ETFs) had seen net inflows of Rs 53,194 crore. Over the past few years, volatile markets and lack of incentives for distributors had seen mutual funds register net redemption.
In 2012 and 2013, equity schemes saw outflows of Rs 15,133 crore and Rs 10,660 crore, respectively. But with equity markets on the rise and steps taken by the industry as well as Sebi to ‘incentivise’ distributors, there seems to renewed enthusiasm for mutual funds.
There are players who believe that equity funds scored above other instruments such as gold, real estate and traditional debt products. Aashish Somaiyaa, CEO at Motilal Oswal AMC, says, “Returns of equity schemes have been better compared to other financial products, and that is one of the reasons for people coming into equity funds…”
In the last one year, small cap funds, mid cap funds and multi cap funds have given positive returns while broader markets have fallen by 5-6%. According to data from the Association of Mutual Funds in India, in the current calendar year, more than 37 new equity schemes (both open ended and close ended) were launched which collected around Rs 5,000 crore.