October investor flow in equity MFs at 16-month high

Equity schemes; assets under management were Rs 5.25 lakh crore by the end of October, from Rs 5.05 lakh crore at end-September

Inflows into mutual fund (MF) equity schemes saw a surge in October, amid weakness in the secondary market. These attracted a net inflow of Rs 9,400 crore, the highest since July last year.
 
The inflow was also thrice that in September and three times the monthly average for the first half of 2016-17. Experts say the fall in stock prices from their September highs spurred investors.
 

“Correction in the market was used as opportunities by investors for additional purchases, a sign of their maturing. The monthly systematic investment plan (SIP) book is increasing and money has continued to flow in from smaller (urban) centres,” said Sundeep Sikka, chief executive officer (CEO) of Reliance Nippon MF.
 
Sector officials say average monthly inflow through SIPs are around Rs 3,500 crore. Equity schemes; assets under management (AUM) were Rs 5.25 lakh crore by the end of October, from Rs 5.05 lakh crore at end-September.
 
“We believe that investors should use any sharp corrections in the equity markets to allocate a large amount in a lump-sum manner. This helps lower the overall cost of acquisition and increases total exposure to the asset class at a good price,” says Amit Nigam, head of equity at Peerless MF.
 
An estimated Rs 2,000-2,500 crore of inflow last month was towards arbitrage funds, say sector officials. “Even if one takes out the arbitrage flows, the month was quite a strong one, with nearly Rs 6,500 crore of net inflow from retail (small investors) and HNIs (wealthy ones),” said the head of operations at private bank-sponsored fund house. He added that several corporate houses were shifting their investments from liquid funds to the arbitrage segment to make better returns, as they assumed arbitrage to be a safer bet.
 
Since the beginning of the year, equity schemes had been struggling to improve the net inflow tally, due to high redemptions. In some months, gross redemptions have been as high as Rs 10,000 crore. On a net basis, however, the sector has continued to show net flows, thanks to the high gross sales.
 
The overall AUM in October stood at Rs 16.28 lakh crore, against Rs 15.8 lakh crore in September. Barring liquid funds and fund of funds which invest abroad, all other categories saw positive inflow, resulting in a cumulative net inflow at month-end of Rs 32,334 crore.