Mumbai: Flows into Indian equity mutual funds in December were the smallest in almost two years as increased market volatility and political uncertainty cooled demand for riskier assets. Stock funds took in a net 6,610 crore ($941 million), the least since February 2017, and a 21 percent drop over the previous month, data from the Association of Mutual Funds in India show.

Investors globally were roiled at the year-end as renewed trade tensions and the Federal Reserve’s pledge to continue paring stimulus added to uncertainty in Indian markets already digesting losses suffered by Prime Minister Narendra Modi’s ruling party in key states. While funds still took in money, the stickiness of the flows will be tested as political uncertainty grips savers with general elections to be held by May.

“Considering the volatility we saw, mutual fund inflows are showing reasonable resilience to the vagaries of the market," N. S. Venkatesh, chief executive officer at AMFI, said in a conference call. “The political scenario is unfolding and people are cautious."

Retail accounts in mutual funds surpassed 80 million for the first time, a 21 percent jump over December 2017, Venkatesh said. About three-quarters of them are in stock plans, industry data show. Total assets rose to 24.1 trillion rupees from 22.5 trillion rupees a year ago.

Retail investors have flocked to mutual funds since Modi took office in 2014. Stock plans account for about 40 percent of total assets, double the level from four years ago. The liquidity has provided a buffer against outflows sparked by global shocks: local funds bought $17.2 billion of shares in 2018, compared with sales of $4.5 billion by their global peers, data compiled by Bloomberg show.

Money-market funds witnessed outflows of 1.49 trillion rupees in December, compared with an inflow of 1.4 trillion rupees in November. Liquid funds typically see withdrawals at the end of a quarter because of advance tax payments, Ventakesh said.

“Systemic liquidity is in near-neutral territory and the Reserve Bank of India has ensured that it will provide ample liquidity to the system. Going ahead, we expect the inflows into liquid funds to resume," he said. Debt funds saw an outflow of 28.1 billion rupees, while balanced funds got 450 million rupees, the AMFI data show.