MF's equity inflows halve in 2016

Investor sentiment hit due to choppy market; SIPs still a bright spot

Investor inflows into equity mutual funds (MFs) are showing signs of moderation after touching their lifetime highs last year. Equity-oriented MFs have attracted inflows of Rs 44,772 crore, roughly half of Rs 90,603 crore received last year.

Industry players say frequent bouts of correction and lacklustre returns this year have impacted investor sentiment towards the equity market. They add a lot of investors are preferring debt schemes due to low-risk attractive returns.

G Pradeepkumar, chief executive officer (CEO) of Union KBC Mutual Fund, says, “Markets had turned quite volatile and there has been an increase in redemptions. Further, lump-sum investments seen in 2014 and 2015 have taken a back seat. The bulk of the inflows has come through systematic investment plan (SIP) route. High net-worth individuals (HNIs), too, have turned wary towards equities.”

What is worth noting is that gross sales remained strong in equity funds. However, higher redemptions dented the net inflows numbers.

Debt funds, on the other hand, on the back of robust performance attracted investors' attention. Against the return of 7-11 per cent in broader equity category of funds, debt funds have given returns between eight per cent and 16 per cent.

Nimesh Shah, managing director and CEO of ICICI Prudential Mutual Fund, says: “There are trends which suggest that bond funds are seeing good sales.”

Despite the fact that inflows in pure equity schemes have nearly got halved, fund managers say the current flow of money is also commendable – higher than the long-term average flows. Navneet Munot, chief investment officer (CIO) of SBI Mutual Fund, says, “One needs to look at inflows since mid-2014. In a matter of two-and-a-half-years, industry has got nearly Rs 2 lakh crore of flows in equity, which is quite robust given the long years of outflows prior to that.”

The pure equity and equity-linked savings scheme fund inflows might have taken a hit, but balanced funds are increasingly witnessing a rise in inflows. On an average, 65-70 per cent of the balanced fund portfolios is in equity. Further, inflows in arbitrage funds, too, have played a role.

Although the calendar year figures of flows in all equity schemes (excluding arbitrage funds) could not be immediately made available, the fiscal numbers suggest that in FY16, total inflows in equity (ex-arbitrage) were Rs 85,000 crore while in the current financial year till November, it is about Rs 48,000 crore. This indicates investors' preference for pure diversified schemes appears to have slowed down.

There are around 400 equity schemes offered by the mutual fund sector, which collectively manages an asset size of Rs 4.68 lakh crore as on November 30.