Equity mutual funds witnessed the lowest net inflows in 51 months in June, industry data showed on Wednesday, as jittery investors paused investments, while others cashed out in a rising market.
Net inflows into equity schemes, including into equity-linked savings schemes (ELSS), crashed 95.75% from ₹5,666.34 crore in May to ₹240.55 crore in June, the lowest since March 2016, Association of Mutual Funds in India (AMFI) data showed. The figure is 96.89% below last June’s ₹ 7,741.04 crore inflows.
Net inflows into equity-oriented funds were substantially lower in June, said Himanshu Srivastava, associate director – manager research, Morningstar India. “This was largely on the back of net outflows from multicap and large-cap funds. This could be attributed to profit-booking by investors, given the surge in the markets in recent times,” Srivastava added. The latest figures could be a one-month blip and equity inflows may soon increase once investors build confidence in the economy, he added.
Multicap and largecap funds saw net outflows of ₹777.60 crore and ₹212.78 crore, respectively, in June, while midcap and smallcap funds saw net inflows of ₹36.70 crore and ₹249.20 crore. Redemptions in equity schemes almost doubled to ₹13,520 crore in June from ₹7,283 crore in May and ₹10,664 crore a year ago.
Benchmark indices are up more than 40% from their March lows, mostly led by foreign liquidity. In June alone, stocks rose over 7%.
“Equity inflows have slowed as many investors are waiting for clarity on their own future cash flows before investing further. A portion of investors have also been caught by surprise over the sharp equity rally and are still waiting for lower levels to enter. Future equity flows to a large extent will depend on how soon the confidence on future cash flows for individuals returns back to normal,” said Arun Kumar, head of research at FundsIndia.com.
At a time of widespread pay cuts, job losses and business uncertainties, inflows through systematic investment plans (SIP) fell below ₹8,000 crore, touching ₹7,927.11 crore, in a steady decline from ₹8,123,03 crore in May and ₹8,376.11 crore in April. The June SIP figures are the lowest since November 2018.
“Equity schemes are seeing profit-booking given some recovery in the markets and the need to preserve cash rather than invest at this stage. The figures are also indicative of challenges such as salary cuts, and the need to hold cash to fulfil other financial commitments such as EMIs, with investments taking a back seat,” said Prableen Bajpai, founder and managing partner at Finfix Research and Analytics.
However, AMFI chief executive N.S. Venkatesh said falling interest rates, the gradual unlocking of economic activity and the expected return to normalcy have seen renewed buoyancy in markets, leading to mutual fund assets under management (AUMs) crossing ₹25 trillion for the first time this fiscal year. “Mutual fund SIP investors may have opted for pause facility and we should see SIP contribution surging in fourth quarter of 2020,” Venkatesh said in a conference call.
Net inflows into fund of funds (FoFs) investing overseas jumped to ₹198.2 crore in June from ₹75.7 crore in May, almost as much as the net flows into actively managed domestic equity funds. The actual figure in international equity is higher because some funds invest up to 35% of their corpus in foreign stocks and 65% in Indian stocks, but are classified as domestic funds. PPFAS Long Term Equity, a multicap fund, which has this kind of structure, saw a ₹328 crore jump in assets under management (AUM). To be sure, AUM is also affected by market moves and hence part of this growth is likely to have come from the market rally in June.
Low-duration funds saw net inflows of ₹12,235.7 crore, sharply higher from the ₹301.2 crore they received in May.