Indian five hundred rupee banknotes are arranged for a photograph in Mumbai, India. (Photographer: Dhiraj Singh/Bloomberg)

Equity Fund Inflows Drop For The Second Straight Month In June

Inflows into equity mutual funds, including equity-linked savings schemes, declined for the second straight month in June.

Total equity inflow for the month declined 14.9 percent to Rs 9,660 crore on a sequential basis, according to data released by the Association of Mutual Funds in India. Overall, mutual fund schemes saw an inflow of Rs 46,475 crore (month-on-month) as compared with an outflow of over Rs 50,000 crore in May.

  • Income funds saw an outflow for the second consecutive month at Rs 23,119 crore.
  • Liquid/money market funds saw an inflow of Rs 52,104 crore compared with an outflow of Rs 46,724 crore in May.
  • Inflow into balanced funds declined in each month for the quarter ended June.
  • Balanced fund inflows declined 44 percent to Rs 1,482 crore month-on-month in June.
  • Arbitrage funds saw an outflow of Rs 1,423 crore compared with an inflow of Rs 720 crore in May.

Equity fund flows are lower than the previous month, potentially because of market conditions but it’s early to assess trends, said Radhika Gupta, chief executive officer at Edelweiss Asset Management Company. “We still believe equity flows will be robust over the long term because of the contribution of SIPs and the attractiveness of equity funds as an asset class relative to others,” she said.

Aashish Somaiyaa, chief executive officer at Motilal Oswal Asset Management expects flows to rise once the markets stabilise. According to him, “While flows determine the market outcome, it’s also true market behaviour reinforces flows.”

Total assets under management increased 1 percent to Rs 22.86 lakh crore in June on a sequential basis. Equity assets under management declined 1.4 percent to Rs 7.3 lakh crore. Balanced funds assets declined 2 percent to Rs 1.74 lakh crore.

Other Highlights:

  • Total inflow for the quarter ended June: Rs 1.34 lakh crore, up from Rs 67,499 crore in previous quarter.
  • Equity inflow in the period: Rs 33,555 crore, 12 percent decline.
  • Total inflow for the first half of calendar year: Rs 2.01 lakh crore, up 66 percent from Rs 1.21 lakh crore in the second half of last year.
  • Equity inflow in the same period: Rs 71,870 crore, down 31 percent.

The trend reflects the maturity of domestic investors as fund flows have continued despite six months of negative returns, said Viral Berawal, chief investment officer at Essel Mutual Fund. “Between January and May while there have been net inflows in equity schemes, the assets under management have shown only a slight increase due to fall in mid- and small-cap stocks."

Despite a change in taxation rules and the spread in returns between liquid and arbitrage fund increasing arbitrage as a category has managed to have a slight increase in assets under management, he said.

The 15 percent correction in equity flows are due to the market volatility deterring new investors, according to Sunil Subramaniam, managing director and CEO of Sundaram Mutual Fund.

However, there is no panic from existing investors as redemptions were roughly constant month-on-month. Debt continues to be out of favour due to expected inflation and rate hikes later in the year and investors preferred to switch to liquid category.
Sunil Subramaniam, MD & CEO of Sundaram Mutual Fund