Equity mutual funds inflows slow down in June: AMFI data

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After hitting a 14-month high in May 2021 inflows into equity mutual funds have slowed down a bit in June 2021. As per data released by the Association of Mutual Funds in India (AMFI), net inflow at Rs 5,988.17 crore saw a drop of 41% compared to Rs 10,082.98 crore in May 2021. The inflow came in lower as investors booked profit at higher valuations.

According to Himanshu Srivastava, Associate Director – Manager Research, Morningstar India, “the net inflows in March, April, May and now in June, clearly, investors are gaining their conviction back on the equity markets. However, the lower quantum of net inflow compared to May could also be attributed to profit-booking by investors with equity markets witnessing a sharp rally in recent times. This is evident from the high redemption amount in June compared to May. But at the same time, the amount mobilised was also higher in June than May signifying that investors are willing to invest more in equity markets now.”

Barring equity-linked saving schemes (ELSS) which saw a withdrawal of Rs 791.86 crore and value funds witnessed net outflows of Rs 114.88 crore, all the equity schemes witnessed net inflows during the last month.

Hybrid funds in flavour

The interesting element of June month data was that all hybrid schemes put together saw a net inflow of Rs 12,361.47 crore more than double of what open-ended monthly schemes saw. On monthly basis as well this category saw a 99% jump in inflows from Rs 6,217.30 in May 2021.

“The prime objective of the funds in this category is to use valuation models and then dynamically rebalance portfolio between equities and fixed income ensuring better risk-adjusted returns for investors. In the current environment, dynamic/asset allocations funds are a good option for investors certainly,” said Akhil Chaturvedi, Associate Director, Head of Sales & Distribution, Motilal Oswal Asset Management Company.

Within the hybrid funds, the most preferred were arbitrage funds as they received the lion’s share inflow of Rs 9,059.57 crore or 73% of all hybrid schemes put together. “Essentially an arbitrage fund protects the downside. So, when markets start moving up or the market starts moving down depending upon the way the market there will be some money coming into the arbitrage funds to protect their portfolio that is where it is happening now, the markets are moving up and moving up pretty fast every day. Some of these risk-averse people would rather put their money in arbitrage funds thinking that okay the arbitrage fund will protect their at least their capital plus marginal return,” explained N. S. Venkatesh, Chief Executive of AMFI.

SIPs breaking records

The contributions under the systematic investment plan (SIP) continued to break records for the second month in a row as it touched lifetime highs of Rs 9,155.84 crore in June 2021 versus Rs 8,818.90 crore witnessed in May 2021. Although the March 2021 SIP contribution stood at Rs 9,182 crore which consisted of Rs 495-500 crore of February reflecting the month of March owing to the weekend dawning at the end of February.

“The volatility in the markets over the last few years has enhanced the appeal of SIPs. Increasingly, investors have started to comprehend the fact that it’s not possible to time the market; and in the process of doing so, they end up missing out on investment opportunities. SIPs on the other hand keep them safe from the risk of timing the markets and helps them to better capitalise on the investment opportunities during turbulent times,” added Srivastava of Morningstar India.

Even SIP accounts saw net additions of 13.67 lakh taking the tally to 4.02 crore in June 2021 from 3.88 crore in May 2021. “Number of SIP accounts breaching 4 crore-mark for the first time ever, is reflective of continued retail investor confidence in the mutual fund asset class. Remarkable jump in SIP account opening augurs well for the mutual fund industry and also shows the confidence of retail investors in participation,” added Venkatesh.

Likewise, the asset under management under the SIP category is also at record highs of Rs 4.84 lakh crore in June 2021 compared to Rs 3.9 lakh crore in January 2021.

Unique investors

The unique investor participation in the mutual fund industry stood at 2.39 crore holding around 10.25 crore folios across 1,554 mutual fund schemes. The number of unique investors stood at 1.19 crore in March doubling in 4 years. In fact, over the last 15 months, that is since April 2020 it has gone up by 31 lakh new investors entering the mutual fund industry and of these approximately 11 lakh were added between April 2021 to June 2021. On yearly basis, this number has gone by 28 lakh. However, this number is still minuscule compared to 42 crore PAN cards and over 7 crore registered investors with the Bombay Stock Exchange.

The mutual fund industry is witnessing a sharp rise in the number of new investors, which has doubled in the last four years to 2.39 crores unique investors. Many new investors are seen embracing mutual funds through the SIP route, over other traditional investment avenues, stated Venkatesh.

On the debt front, net inflows came in at Rs 3,566.39 crore from open-ended debt schemes mutual funds after withdrawal of Rs 44,512.04 lakh crore into last month.

Gold exchange-traded funds witnessed a picked up pace with total net inflows of Rs 359.66 crore compared to Rs 287.86 crore infused in May 2021.

The asset under management (AUM) of the mutual fund industry rose to an all-time high of Rs 33.66 lakh crore in June-end from Rs 33.05 lakh crore in May-end.