Equity flows slow to a 22-month low; December SIPs surpass Rs 8,000 crore

Number of folios cross 80 million for first time

Flows into equity schemes touched a 22-month low of Rs 6,606 crore in December as market volatility made investors wary.

The number of folios, on the other hand, crossed the eight-crore mark for the first time in the industry’s history. 

“It has been a tricky year for investors with volatility and negative returns in equity diversified funds playing on their minds. The silver lining is that investors have stayed put and continue to invest through the SIP route, which augurs well for the industry,” said Swarup Mohanty, chief executive officer of Mirae Asset MF. 

The equity inflow (equity schemes and equity-linked saving schemes) for December was 42 per cent lower than the past 12-month average of Rs 11,385 crore.

Fund managers faced a tough time beating the benchmark in 2018, with nearly three out of four diversified equity schemes under performing their respective underlying indices.

Market observers have attributed this to large sums chasing too few stocks, and the impact of regulatory changes such as categorisation of schemes as well as the introduction of total returns index, in lieu of a simple price index.

Mutual funds garnered Rs 8,022 crore of its assets by way of SIPs in December 2018, 29 per cent higher than the previous year, data from Amfi shows. Funds took in Rs 7,985 crore through SIPs in November.

“It is heartening to see that we have gone past the Rs 8,000 crore per month in SIP book. This highlights that retail participation in equity is well on track. Gross flow in equity, including balanced funds, has increased over the last month, which is a positive trend,” said Vishal Kapoor, chief executive officer of IDFC MF. 

Kapoor attributed the slowdown in inflows in equity schemes to the year-end holidays, a time when distribution activity typically slows down. “Most of it picks up in the January-March quarter when the focus shifts to tax saving ELSS funds,” said Kapoor. 

The change in distributor commission structure slowed down the collection for new fund offers further. Open-ended equity schemes garnered just Rs 409 crore in December.

On the debt side, liquid funds once again saw outflows in December to the tune of Rs 1.48 trillion. In September, these funds had seen their worst monthly redemption in over a decade, following the IL&FS default.

“Systemic liquidity is neutral as the Reserve Bank of India (RBI) has stepped in. We don’t see liquidity tightening anytime soon. We should see positive flows coming back in January for liquid schemes,” said Amfi’s Venkatesh.

Overall, equity assets grew two per cent to Rs 7.8 trillion in the past year. Total AUM of the MF industry, on the other hand, fell five per cent to Rs  22.85 trillion.

“We saw reasonable inflows this year even when Indian macro was under some pressure. Lots of macro and fundamental adjustments have already happened. And with that, the markets are looking far more attractive now than a year ago. This should lead to increased inflows into mutual funds. We are optimistic that inflows will sustain,” said Manish Gunwani, chief investment officer, equity investments, Reliance Mutual Fund.