Equity mutual fund inflows dry up

Net inflow to equity schemes in first half of 2016 a fourth of that a year ago

Equity mutual fund schemes had net inflows of Rs 13,545 crore in the first half of 2016, only a fourth of the Rs 53,578 crore they had garnered in the corresponding period last year.

Average monthly inflows have declined from Rs 8,900 crore in the first half of 2015 to Rs 2,250 crore in the first six months of 2016.

Sectoral players said the sharp fall in the market at the start of the year and events like Brexit had affected flows. “The year began with a lot of global uncertainty. Collectively these factors forced investors to stay on the sidelines,” said A Balasubramanian, chief executive officer (CEO) of Birla Sun Life Mutual Fund.

New equity account additions during the first half of 2016 were 1.9 million, compared with 2.2 million in the corresponding time last year. Drying flows have hit mutual fund investment in the stock market. Mutual funds, which made net investments of Rs 32,873 crore in the first half of 2015, have pumped in a mere Rs 9,564 crore this year.

Dinesh Khara, managing director of SBI Mutual Fund, said, “The first half of 2016 appears to be an aberration. Amid global uncertainty, market sentiments were weak, forcing investors to be cautious.”

Sectoral players expect inflows to pick up in the remaining part of the year. G Pradeepkumar, CEO of Union KBC Mutual Fund, said, “There will be a strong pick-up in the second half. Gross sales have improved and this will  reflect in net inflows. Good quarterly results will provide a fillip to the market.”

“Monsoon apprehensions have faded. This is helping sentiments to revive. The monthly systematic investment plan (SIP) book is growing for the industry and better growth is expected in the second half,” said Balasubramanian.

According to Khara, structural reforms have increased the attractiveness of India as an emerging market. “Inflows should revive and the sector as a whole will be able to see flows like those witnessed last year,” he added.

In 2015, overall net inflows in equity schemes were Rs 90,600 crore. The current year has received only 15 per cent of that sum. Assets under management of equity schemes are at a record high of Rs 4.3 lakh crore.

Though net inflows have been hit by higher redemptions, what is going for the sector are robust gross equity sales at above Rs 10,000 crore a month.