Equity Inflows Rebound But Debt Schemes Drag Down Mutual Fund Flows In May
Debt schemes pull down mutual fund inflows in May even as investments into equity rise.
Mutual fund flows declined in May amid concerns over the industry’s exposure to corporate debt even as investments into equity schemes rebounded.
The net inflows across all segment of schemes fell 23 percent month-on-month to Rs 76,990 crore in May, according to data released by the Association of Mutual Funds in India. That was driven by a 42 percent sequential decline in inflows into income or debt-oriented schemes to Rs 70,119.45 crore.
Bulk of the inflows in May came through the liquid or the money-market category, used by companies to park surplus cash for the short term. But even that was 23.6 percent lower than the previous month at Rs 68,583 crore.
The concerns about debt investments started in September last year when mutual funds wrote off investments in IL&FS Group. Standstill agreements with Essel and Anil Ambani groups and the troubles of Dewan Housing Finance Corporation Ltd. only added to the worries.
“The negative news flow on the credit side of things has been playing on the minds of investors and doesn’t seem like ending anytime soon after we had reports of DHFL last week as well,” said Swarup Mohanty, chief executive officer at Mirae Asset Global Investments. “All these events in the end leave a bad taste and is reflecting in the data in front of us. Hope that sanity prevails and business returns to normal. But it’s easier said than done.”
“It's a transition period for investors in income and debt-oriented schemes and we expect it to last for another two, three months or even more,” Mohanty said.
Equity Flows Rebound
Inflows into equity mutual funds rebounded from April’s 31-month low to rise in May. That came as the stock benchmarks scaled records after Prime Minister Narendra Modi’s return to power with a bigger majority. Equity funds, including equity-linked schemes, saw a 17.3 percent jump in inflows to Rs 5,408 crore.
Contribution through systematic investment plans remained stable at Rs 8,183 crore in May.
Net outflows from closed-ended income fund schemes dropped from over Rs 18,500 crore in the previous month to Rs 2,001.1 crore—about Rs 1,800 crore of redemptions came from fixed maturity plans. Such schemes are considered safer because they invest in high dividend-generating stocks, government securities, certificate of deposits, corporate bonds and money-market instruments.
Balanced funds saw outflows for the fifth straight month at Rs 2,481 crore.
The mutual fund industry’s total assets under management rose 1 percent month-on-month to Rs 25.43 lakh crore in May.