Mumbai: As equity markets saw steady gains in financial year 2018, inflows into equity mutual fund schemes stayed robust but tumbled in March as investors preferred to book profits possibly to avoid the long term capital gains (LTCG) tax effective from 1 April.

According to data provided by Association of Mutual Funds in India (AMFI), net inflow into equity mutual fund schemes was at Rs1.69 trillion in FY18. However, flows into equity mutual fund schemes fell 59% to Rs6,657 crore in March from Rs16,268 crore in February. The amount compares to Rs8,216 crore in March 2017, data by AMFI showed.

As per AMFI data, redemption in equity mutual fund schemes also touched a record high at Rs2.29 trillion in the fiscal 2017-18. In the year ago period, equity mutual fund schemes saw an outflow of Rs1.49 trillion. Overall in the year, March also saw highest-ever redemption in equity mutual fund schemes at Rs36,987crore.

Analysts said the redemptions were higher probably to the long terms capital gains tax (LTCG) being implemented from 1 April. As per the new taxation norm, profits exceeding Rs1 lakh a year made by selling listing shares after 31 March will attract tax of 10% which was earlier nil.

According to Kaustubh Belapurkar, director of fund research at Morningstar Investment Adviser (India), investors were probably realigning their funds and not necessarily booking profits. “It could be also partially because of the March 31 deadline to book profits and not fall under the LTCG taxation. Typically, the other reason we have seen is that towards end of year, people do tend to make some adjustments towards their investments. So, in this period, investors are seen moving in and out of schemes; it is completely healthy," he added.

Rajat Jain, chief investment officer at Principal Mutual Fund said that overall flows in equity schemes have been robust. “In fact, investors who were waiting at the sidelines pumped money into mutual funds after markets corrected. There has been no change in behaviour of investors. Implementation of LTCG will have no material impact on the overall mutual funds industry in the long term," he added.

According to the industry association of asset management companies (AMCs) of all mutual funds in India, mutual funds industry added 32 lakh new investors over the last one year. The industry saw assets under management (AUM) growth of 25% (Rs4.25 trillion) till 28 February, 2018. The total number of folios and systematic investment plan (SIP) accounts in the same period saw a growth of 26% and 52%, respectively.

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