The portrait of Mahatma Gandhi is displayed on an Indian 50 rupee, left, and 2000 rupee banknotes in an arranged photograph in Bangkok, Thailand. (Photographer: Brent Lewin/Bloomberg)

Inflows Into Equity Mutual Funds Hit Eight-Month High In October

Inflows into equity mutual funds, including equity-linked savings schemes, hit a eight-month high in October aided by new fund offers and popularity of systematic investment plans.

Total equity inflow rose 13 percent over the previous month to Rs 12,622 crore in October, according to data released by the Association of Mutual Funds in India. The mutual fund industry witnessed a total inflow of Rs 35,529 crore compared with an outflow of Rs 2.3 lakh crore in September.

“A combination of factors is behind the making of these numbers. First, the month gone by saw a lot of one-time fund offers—close to Rs 3,000 crore of funds were raised. Second, a rising SIP book of around Rs 8,000 crore,” said Radhika Gupta, chief executive officer of Edelweiss AMC.

The liquid or money market category contributed the most to the total inflow into mutual funds. This comes after money market schemes, used by companies to park surplus cash for the short term, saw the biggest monthly outflow in at least a decade in September as mutual funds faced redemption pressure because of defaults by IL&FS Ltd. and quarter-end withdrawals. Investors pumped Rs 55,296 crore in the money market category last month against an outflow of Rs 2.11 lakh crore in September.

Also read: IL&FS Crisis Spurs Biggest Monthly Outflow From Liquid Funds In A Decade

The liquid category is a reflection of the shrunk liquidity in the banking system, said Suyash Choudhary, head of fixed income at IDFC AMC. “There’s an element of risk aversion as well which will change once the commercial paper refinancing process is behind us.”

Non-bank financiers and mortgage lenders have Rs 2.7 lakh crore ($37 billion) of debt maturing in the next five months, Bloomberg reported quoting an anonymous person.

The outflow from income funds rose 16 percent sequentially to Rs 37,642 crore—the most since December 2017. 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 fund inflows fell for the second straight month to Rs 519 crore from Rs 731 crore in September.

Total assets under management rose 1 percent month-on-month to Rs 22.23 lakh crore in October. Total equity assets fell 0.7 percent to Rs 7.42 lakh crore during the period.

By March, the mutual fund industry will have assets under management of Rs 25 lakh crore, largely due to robust inflows into systematic investment plans, according to NS Venkatesh, chief executive officer at AMFI. “We will see more inflows coming into the market, especially from the retail side.”

Also read: India's Second-Oldest Mutual Fund Wary on Debt From Financiers