In November 2018, private sector individual APE was almost flat as compared to 17-19% growth over the past three months.
The slowdown in retail investor appetite for capital market investments is reflecting in inflows to the sector. In November 2018, private sector individual APE was almost flat as compared to 17-19% growth over the past three months. Inflows to equity mutual funds declined to Rs 86 billion, the lowest in recent months, largely holding on due to volumes in SIPs. We expect near-term volumes to remain weak though higher growth in the protection business makes topline growth less relevant.
Individual APE slows down across the board
Private sector individual APE was down 1% year-on-year (yoy) in November 2018 as compared to 17-18% growth over the past three months. Notably, the growth rate had moderated in April-July 2018, but picked up in later months to once again slow in November 2018. HDFC Life reported 20% year-on-year (y-o-y) decline in individual APE post strong (37% yoy) growth in October; ticket size in individual non-single business was down 24% month-on-month(m-o-m) likely indicating that the slowdown was in ULIPs. The company expects its growth trajectory to remain moderate over the next few months. Max Life also saw a slowdown in momentum and delivered 13% growth in individual APE (27-31% in past two months) likely on the back of higher growth in ULIPs (43% of APE in 1QFY19 from 29% in Q1, FY18).
ICICI Prudential Life’s retail weighted premium was down 24% y-o-y for the month (17% decline in October 2018). The company has worked on monthly paying policies, which is one of the reasons for weak growth. According to a company release, its volume was up 0.3% y-o-y taking into account overall (individual and group) adjusted premium, including accrued but not received premium.
SBI Life reported moderate 10% y-o-y growth in individual APE after recording strong growth of >15% for the previous two months. The company has focused on streamlining its processes and increasing its share of the protection business. Its growth will remain moderate, much below 30%+ levels reported in the past. Birla SL reported 55% y-o-y growth in individual APE and Tata AIA was up 59% y-o-y as they continued to make inroads in HDFC Bank. Birla SL saw 41% y-o-y rise in ticket size in the individual non-single segment, while Tata AIA’s ticket size was down 7% y-o-y, the reason for this divergence is yet unclear.
Lowest inflows to equity MFs in recent months
Mutual fund inflows to equities saw a steep decline, with inflows to `86 billion in November as compared to `97-130 billion since March 2018. This is the lowest inflow since the recent correction in equity markets. Notably, SIPs were stable for the past three months at `79-80 bn; the entire volume for the month of November was practically on account of SIPs. On the positive side, liquid funds recorded strong inflows in November 2018 (`1.36 trillion); aggregative inflows in the past two months were about 90% of the outflows in the month of September.
Edited extracts from Kotak Institutional Equities Research