New Delhi: Investments in mutual funds slumped substantially in August, with the industry witnessing a net fund inflow of over Rs32,600 crore, a 74% decline on a month-on-month basis.
At the end of August, investors poured in funds worth Rs32,673 crore, down from Rs1,23,679 crore at the end of July, a monthly report by Association of Mutual Funds of India said.
Despite the slump in the volume of net investment, investors continued to prefer mutual funds as an investment option as inflows continued for the second straight month.
During August, fixed income plans with assured returns annually, saw a maximum investment of only Rs38,275 crore.
“Uncertain interest rate scenario in the country are making investors put in money in fixed income schemes. Also volatility in the equity market saw investors pulling out from such funds,” Kotak Mutual Fund Head (Fixed Income and Product) Lakshmi Iyer said.
However, equity funds investing in stocks saw net outflows of Rs142 crore and liquid or money market funds, with higher liquidity and short maturity period, saw outflows worth Rs5,215 crore.
“Income funds were in demand in August. Banks and corporate houses have parked their surplus cash with the fund houses, thereby leading to an increase in the assets under management (AUMs),” Taurus MF managing director RK Gupta said.
Gilt funds, which invest in government securities, saw outflow to the tune of Rs446 crore during August.
Analysts feel that after a hefty pull out from MFs in the last fiscal, investments are picking up this year, with June being the only month to witness outflows worth Rs83,937 crore.
So far this fiscal, the MF industry has seen net inflows worth Rs2,56,755 crore, while the same was at Rs48,128 crore in the first five months of the previous fiscal.
“Inflows into the MFs would pick up further as and when the equity market stabilises. The current volatility in the stock market is denting investor sentiment and that is keeping them away from investing in equities,” Iyer added.
Analysts believe that volatility in the stock market has made banks park their surplus cash with income or debt funds with assured returns which helped the industry’s average assets under management (AUM) breach the Rs seven lakh crore mark at the end of August.
The combined average AUM of the 36 fund houses hit the historic Rs7 lakh crore-mark at the end of August at Rs7,49,911.91 crore, an increase on 9% over the month-ago period.
“In absence of credit growth, banks are right now sitting on surplus cash. With the increase in bank deposits banks are parking money in MFs which helped in increasing the industry AUM,” Gupta added.