Equity mutual fund inflows down 16% in volatile markets

NEW DELHI : Investments in open-end equity mutual funds fell 16% sequentially in June to 15,497.76 crores as rising inflation, geopolitical tensions sparked by conflict in Ukraine and selling off by foreign investors spooked investor sentiment.

Indian investors, however, continued to have confidence in equity markets, with equity mutual funds recording positive net inflows for the 16th consecutive month in June, data released by the Mutual Funds Association of India showed on Friday. (Amfi).

At the same time, open-ended debt mutual funds recorded net outflows of 92,247.63 crores last month as companies paid off their debt investments to make advance tax payments, while banks wanted to avoid capital charges imposed by the Reserve Bank of India. Debt funds had recorded net outflows of 32,722.25 crore in May as they witnessed influx of 54,756.60 crores in April.

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Monthly Stock Feeds

Outflows in June were largely driven by overnight funds, liquid funds and ultra-short duration funds.

“An uncertain macro environment, driven by expectations around a rising rate cycle, rising commodity prices and slowing growth, likely led investors to steer clear of debt funds. Single-digit returns , rising bond yields and rising inflation have also likely led investors to opt to redeem their investments in debt funds in favor of other investment avenues,” said Kavitha Krishnan, senior lead analyst of Research, Morningstar India.

As a result, the net assets under management (AUM) of the mutual fund industry decreased for 35.64 trillion in June from 36.98 trillion the previous month.

Meanwhile, retail investors remained optimistic about the future, with Amfi data showing a contribution via monthly systematic investment plans (SIPs) of 12,275.79 crore. Additionally, the number of SIP accounts reached a record high of 55.4 million in June, surpassing May’s peak of 54.8 million.

“The strong momentum towards the grand megatrend of financialization of savings seen across the country continues to remain intact, even against the backdrop of a gloomy macro-economic situation, both domestically and internationally,” NS said. Venkatesh, CEO of Amfi.

Within the equity segment, flexi-cap and large-cap funds recorded net inflows of 2,511 crores and 2,130 crore, respectively.

This indicates that despite the volatility of the stock market, investors are investing their money in stock-oriented schemes with the aim of generating long-term returns.

“It could also be the result of investors becoming more aware of the importance of having inflation-fighting assets in their portfolios,” said Priti Rathi Gupta, founder of LXME, a financial platform for the women.

Within the hybrid category, Dynamic Asset Allocation or Balanced Advantage Funds, Balanced and Hybrid Aggressive Hybrids and Conservative Hybrids recorded positive flows.

“These trends reflect a sign of maturity in the mindset of investors. The SIP fee remaining above 12,000 crore indicates increased awareness among retail investors of the long-term direction of equity investments and understanding of current volatility as an integral part of equity investing,” said Akhil Chaturvedi , Commercial Director of Motilal Oswal AMC.

Meanwhile, gold exchange-traded funds (ETFs) saw lower net inflows in June to 134 crores of 203 crores in May.

This could be due to investors’ expectations of an increase in interest rates leading to lower gold prices.

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Dolores W. Simon