Mumbai: Mutual funds saw net inflows into schemes such as income and gilt funds in December after three months of heavy outflows in most categories managed by them, according to data from the Association of Mutual Funds in India (Amfi), an industry trade body.
Inflows, net of sales, into income funds were Rs4,501 crore in December and Rs988 crore into gilt funds, Amfi data show.
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The net asset value (NAV) of these two categories of funds has been steadily rising, whetting investor appetite, after the Reserve Bank of India (RBI) started lowering policy rates. Taking a cue from other central banks, RBI dropped the repo rate, which it uses to inject liquidity into the system, in phases to 5.5% earlier in January from 9% in October.
Income funds invest in a mix of government bonds and corporate debt, while gilt funds invest in government bonds. The prices of these debt instruments moves up as interest rates fall, thus increasing the NAV of the mutual fund scheme that invests in them.
Data provided by Value Research India Pvt. Ltd, a New Delhi-based research service that tracks the performance of mutual fund schemes, shows that income funds generated one-year average returns of 9.73% and gilt funds 15.91%.
December did not change much for equity schemes, though. Excluding inflows of Rs186 crore into tax-saving schemes, the equity category saw net outflows of Rs538 crore over the month. Average one-year returns for the category have declined 56.63%.
Net inflows in December were Rs90 crore across all categories of funds, sharply lower than the Rs13,790 crore in November. But a majority of November’s inflows came from Rs15,143 crore that went into liquid funds, which invest in short-term debt and are used by corporate houses to park surplus money. In December, liquid funds saw net outflows of Rs4,342 crore.
All categories of schemes, including equity funds, balanced funds, liquid funds, income funds and gilt funds, saw net outflows of Rs624 crore in 2008, as opposed to net inflows of Rs1.38 trillion in 2007.
Balanced funds invest in a combination of debt and equity.
Outflows in 2008 were largely on account of about Rs90,000 crore being redeemed by investors from liquid and income funds between September and October, following the liquidity crisis in the aftermath of the collapse of US investment bank Lehman Brothers Holdings Inc.