Flows into equity mutual funds remain robust

Rs 10,000 crore in May despite market correction

Investors poured Rs 10,000 crore into equity mutual funds (MFs) for a second straight month in May. This was despite the sharp correction in the market on lacklustre earnings.

MF equity schemes have now witnessed net inflows for 12 months. Since May 2014, about Rs 91,000 crore has flown into MF schemes, which many see as a counterbalance to foreign portfolio investment.

The Rs 20,000 crore inflow in April and May was despite foreign brokerages scaling back their year-end Sensex targets.

“Investors have started looking at equities with a long-term view. With political stability at the Centre, they are confident the situation will improve in the next three to five years, which will reflect in equities,” said H N Sinor, chief executive officer of the Association of Mutual Funds in India.

Sector experts said retail investors were using the correction as a buying opportunity. The market, which has rallied since August 2013, is currently 10 per cent off its peak. Several stocks in the broader market have fallen more than 30 per cent.

“It is a good sign that investors are not perturbed by volatility. Investors are showing maturity by remaining invested and also incrementally buying when the market is correcting. We expect the momentum of inflows to continue,” said Nimesh Shah, chief executive officer and managing director, ICICI Prudential AMC, the second largest fund house.

In the past financial year, equity schemes saw inflow of Rs 71,000 crore ($12 billion). In the first two months of 2015-16, flows exceeded Rs 20,000 crore ($3.2 billion). Assets under management in the equity segment hit a new high in May at Rs 3.65 lakh crore in 32 million investors’ accounts. In the last one year, nearly three million new equity accounts were added to the fund industry’s basket. Currently, the Rs 12-lakh crore mutual fund industry offers about 440 equity-related funds to investors.

In the last financial year, equity schemes saw inflows of Rs 71,000 crore (around $12 billion). In the first two months of 2015-16, flows exceeded Rs 20,000 crore ($3.2 billion). The asset under management (AUM) in the equity segment hit a new high in May at Rs 3.65 lakh crore with over 32 million investors' accounts. In the last one year, nearly 3 million new equity accounts have added up to the fund industry's basket. Currently, the Rs 12 lakh-crore mutual fund industry offers about 440 equity-related funds to investors.

In a recent report, Morgan Stanley said domestic flows into the equity market are set to grow six-fold in the next 10 years.

“We think India is set for a surge in household equity saving. A new generation is looking at equities. The recent evidence is that households have started raising equity exposure, with a discernible increase in systematic investing. Our estimate is for a domestic flow of $300 billion over the coming 10 years versus the $50 billion and $134 billion that households and foreign institutional investors invested over the previous 10 years,” said Ridham Desai, managing director of Morgan Stanley India, in the report.