Inflow in equity MFs tapers in Oct
Benchmark indices gain 8%; strong markets keep retail investors from buying.
Strong stock markets in October kept at bay retail investors who access equities through mutual fund schemes.
During this period when domestic benchmark indices gained close to eight per cent, investors put in far less new money in equity MFs. Net inflows were Rs 182 crore, just a little over a tenth of those seen in September.
There were net inflows in equity for the third month in a row, previously witnessed during December-February, in the previous financial year. However, there are clear signals that the flow of fresh money has tapered. The October rebound in equities, say fund managers, made investors cautious.
| HOW THEY FARED: A STATUS CHECK Flow of funds in different mutual fund categories in October | |
| Categories | Net inflow/ |
investing abroad
Source : Association of Mutual Funds in India
In August, when benchmark indices saw a value erosion of eight per cent, inflows in equity schemes seen were close to Rs 2,000 crore, a rare event in recent times. In September, when equity markets declined around 1.3 per cent, the inflows came down to Rs 1,400 crore.
“This is yet another month where investors showed their maturity in investment. This has now become a recent trend, that when markets move up, the retail money tapers and during corrections, inflows increase substantially,” says the chief executive officer of one of the top five houses.
According to the chief investment officer of a public sector bank-sponsored fund house, “Inflows (in equities) have become a function of (stock) markets’ direction. With anticipated uncertainty in the foreseen future, we expect the industry would see fresh money coming in whenever markets correct. This year, the situation does not seem that difficult as last year.”
Last year was one of redemption for equity schemes. During April-October, the industry had seen redemption of Rs 17,500 crore from equities alone. With around Rs 3,300 crore of fresh inflows in equities so far this year, fund managers are relieved.
However, despite being the third month of net inflow in equities, fund managers chose to sell shares in September-October worth Rs 1,140 crore. In August, fund managers took advantage of weak markets and pumped in Rs 2,500 crore to buy shares, the largest buying in three years.
“Selling in recent months did not happen due to redemption pressure; rather, fund managers booked profits as markets ran up. In case markets slip from current levels, we will prefer to continue with our strategy,” explains an equity head of a medium-sized fund house.
Statistics from the Securities and Exchange Board of India show that during this month, till last weekend, fund houses had sold shares worth Rs 315 crore.
October emerged as a relatively better month for the fund industry. All categories, except gilt funds and exchange traded funds (barring those in gold), saw fresh flows. Overall inflow during the month was Rs 41,287 crore, which pushed the flows so far in 201-12 to Rs 96,566 crore, against net outflows of Rs 6,194 crore during the previous corresponding period.