Retail investors return to equity MFs in March

FY13 ends on a positive note as net inflows were positive

Retail investors were drawn to equity mutual fund schemes in March, the first time in 10 months, owing to demand for the industry’s tax-saving product — equity linked savings scheme (ELSS).

In March, equity mutual funds, including ELSS, recorded net inflows of Rs 768 crore, after seeing continuous monthly outflows since May 2012, according to the latest data with the Association of Mutual Funds in India. Backed by strong gross sales, the equity segment, largely avoided by investors, managed to end in the positive territory for the month.

Equity sales stood at Rs 4,468 crore, a rise of 20 per cent compared with Rs 3,713 crore in February.

Mutual fund officials said though the net inflows were a breather for the mutual fund industry, the demand might not be sustained, as the near-term outlook for equities was hazy. In 2012-13, equity schemes saw net outflows of Rs 14,587 crore, a record high.

“Unless there is stability in the markets, attracting retail money into equities looks difficult. To draw investors, a strong bull run is the need of the hour. Else, the situation may worsen from here on,” said a sales official at a mid-sized fund house.

Large- and mid-cap equity schemes returned an average of 4.5 per cent in the year ended April 9, compared with the Sensex’s 5.8 per cent returns.

In March, investors typically buy ELSS for tax-saving purposes, ahead of the end of the financial year. The industry saw several existing ELSS being converted into Rajiv Gandhi Equity Savings Schemes, helping it avail of tax benefits up to an investment of Rs 50,000.

Table : Showing net inflows in equity MFs* during FY13
Months	Net inflows (Rs crore)
April	-  615
May	+420
June	-286
July	-949
August	-2286
Sept	-3559
Oct	-1984
Nov	-1525
Dec	-1718
Jan	-2690
Feb	-163
March	+768

* Includes equity linked saving schemes (ELSS)
Source : Association of Mutual Funds in India (Amfi)