Photo: Aniruddha Chowdhury/Mint
Photo: Aniruddha Chowdhury/Mint

Net inflow into equity MFs at 5-month high in August

  • Redemptions from equity schemes ease to 7,730.25 crore, down 36.50% from July
  • Corporate bond funds, which have to invest 80% assets in AA+ securities, saw 3,578 crore inflows

MUMBAI : The confidence of Indian investors in equities appears to be intact despite turbulent times in the stock markets.

Net inflow into equity mutual fund schemes touched a five-month high in August, showed data issued Monday by the Association of Mutual Funds in India (Amfi). Equity mutual fund schemes saw an inflow of 9,214.81 crore during the month, a 13.29% increase from July, and 10.02% more than August 2018.

During August, redemptions from equity schemes fell 36.5% sequentially to 7,730.25 crore. In August 2018, redemptions were at 15,702 crore.

N.S. Venkatesh, chief executive, Amfi said retail investor interest in equity mutual funds continued to be steady for the fourth successive month, displaying maturity, despite uncertain economic and volatile market situations. “Net inflows, largely in all categories of equity funds, especially in small- and mid-cap funds, as also in the ELSS segment, signify heightened confidence and interest in emerging businesses and disciplined tax planning," he added. ELSS stands for equity-linked savings scheme.

However, inflows from systematic investment plans (SIPs) saw a slight decline in August. The total amount collected through SIPs was 8,230.76 crore, against 8,324.28 crore in July. SIPs allow people to invest a fixed amount in a mutual fund scheme periodically at fixed intervals.

Mutual fund inflow is critical to maintain buoyancy in the stock markets with foreign institutional investors (FIIs) continuously selling Indian shares due to a host of reasons ranging from macro headwinds to taxation woes. In August, FIIs dumped $2.20 billion of Indian shares in the worst sell-off in 10 months, while domestic institutional investors (DIIs), including mutual funds and insurance companies, pumped in 20,933.59 crore.

The National Stock Exchange’s India VIX index, or fear index, which tracks investors’ perceptions of volatility, rose nearly 20% in August. Elevated levels of VIX indicate that investors are expecting correction at least over the next month.

Venkatesh, however, said SIPs will continue to witness robust flows and, on the debt side, liquid funds may see volatility owing to quarter-end phenomenon.

Vishal Kapoor, chief executive officer, IDFC Asset Management, said the Amfi data for August indicates that smart investors are moving back into the market and are allocating their funds across multiple categories.

(Graphic: Paras Jain/Mint)

Corporate bond funds, which have to invest at least 80% of their assets in securities with AA+, or more, saw inflows of 3,578 crore, while credit risk funds that invest in lower-rated papers saw outflows of 2,270 crore. This mirrored the happenings of the previous month and is part of a broader trend of risk aversion in the debt space. Banking and public sector undertaking debt funds, which are also a relatively low-risk category, saw net inflow of 2,769 crore. Despite the rate cuts, Gilt (government securities) and long duration funds failed to witness major inflows.

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