Equity flows in January 43% lower than 12-month average, hit two-year low

The mutual fund (MF) industry witnessed deceleration in equity inflows for a third straight month in January. The flows into equity schemes, which includes tax-saving schemes, stood at Rs 6,158 crore last month. This was the lowest tally since February 2017. Equity inflows in January were 42 per cent lower compared to last 12-month average of Rs 10,594 crore.

Market players say volatility in the broader market and sharp sell-off in indebted companies could have hurt investor sentiment.

"The monthly data shows there are reasons to be worried on the equity side. Of the Rs 6,000 crore of equity flows, data shows Rs 2,000 crore has come through new fund offers. Post rationalisation of schemes, there is a limit of how many new schemes can be launched on monthly basis,” said Aashish Somaiyaa, managing director and chief executive officer of Motilal Oswal MF.

Another disappointing trend was outflows from balanced schemes. According to the data released by industry body the Association of Mutual Funds in India (Amfi), the category saw first month of outflow since May 2014. The outflow stood at Rs 952 crore in January.  

However, there were also some positives in the monthly numbers for the industry. The income category which has been hit due to volatility and credit events in debt markets, saw an inflow of Rs 2,080 crore after eight months of outflows on the trot. Market participants expect the flows to improve on the debt side going ahead.

“With RBI easing the rates, we debt expect to inflows to rise in the coming weeks,'' said NS Venkatesh, chief executive officer of Amfi.

Investors committing lump sum money to equities seem to have applied brakes, but inflows through systematic investment plans (SIPs) continued to grow. SIPs in January stood at Rs 8,063 crore, marginally higher compared to the previous month.

"Despite acute market volatility owing to credit events and global uncertainty, retail Investors continue to repose their faith in the India growth story. This is quite evident from the SIP flows and folio numbers, which continue to rise sequentially,” Venkatesh added.

Overall, the industry saw a total inflow of Rs 65,439 crore as against an outflow of Rs 1.36 trillion seen in December. The inflows in January were primarily led by Rs 58,637 crore of inflows seen in the liquid fund category. The broader market conditions remained week in January even as benchmark indices found support from a select set of companies.

The Nifty Midcap 100 was down 5.43 per cent, while Nifty smallcap 100 was down 4.9 per cent during the month. Meanwhile, BSE Sensex was up 0.52 per cent, while Nifty 50 saw a marginal fall of 0.29 per cent during the month.  

The assets under management (AUM) for the industry stood at Rs 23.4 trillion in January compared to Rs 22.9 trillion at the end of previous month. Total equity AUM dipped marginally to Rs 7.74 trillion.