Equity mutual funds had recorded net inflows of over Rs 1.7 lakh crore in financial year 2017-18, with a monthly average of around Rs 14,200 crore. But in the first two months (April-May) of the current fiscal, inflows into equity funds have slowed down and stood at Rs 11,171 crore and Rs 11,350 crore respectively, data from Association of Mutual Funds in India (Amfi) showed.
Market participants say that the slow pace of inflows into equity funds (also includes 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 Rs 6,657 crore — 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.
Nilesh Shah, MD of Kotak Asset Management Company said, “The slowdown into equity funds were due to the multiple factors. First being carnage in the mid and small cap stocks, which had huge impact on portfolio management services (PMS), but it also had side effect on mutual funds. Also, months of April and May are holiday season and there was not much activity. All such factors led to flows slowing down.” Industry participants say that if volatility continues flows might slowdown further in the months to come. In the last three months, Sensex has given returns of 5.2%, while its year to date returns is 4.8%.
Jimmy Patel, MD and CEO at Quantum Asset Management Company said, “Despite the flows into systematic investment plans (SIPs) continuing to remain strong, there are even some SIPs cancellation in the past two months.” In the month of April, contribution of SIPs stood at Rs 6,690 crore as compared to Rs 7,119 crore in the month of March. 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 against Rs 43,921 in 2016-17.
The data from Amfi also showed that in the month of May, the mutual fund industry saw net outflows of Rs 50,000 crore. Income funds saw outflows of `20,407 crore, while liquid scheme saw an outflow of `46,724 crore in the month of May.