Equity mutual funds inflow tumbles 95% in June due to profit booking

Inflow into equity mutual funds slumped 95 per cent to a little over Rs 240 crore in June as investors pulled out from large-cap and multi-cap funds due to profit booking.

This is the third consecutive monthly decline in inflow in equity mutual funds, data by the Association of Mutual Funds in India (Amfi) showed on Wednesday.

Overall, the mutual fund industry witnessed a net inflow of Rs 7,265 crore across all segments last month, much lower than Rs70,813 crore in May, primarily due to outflow from liquid funds.

As per the data, inflow into equity and equity-linked open ended schemes was at Rs 240.55 crore in June as against Rs5,256 crore in May, translating into a decline of 95 per cent.

Such schemes attracted Rs 6,213 crore in April, Rs 11,723 crore in March, Rs 10,796 crore in February and Rs 7,877 crore in January. Union AMC CEO G Pradeepkumar said the drop in net flow into equity funds could be attributed partly to profit booking on the back of the rally witnessed in equity markets in June.

Morningstar India Associate Director Manager Research Himanshu Srivastava also attributed the lower inflow in equity-oriented funds to outflow from multi-cap and large-cap funds due to profit booking by investors, given the surge in markets in recent times.

Multi-cap, large-cap and value funds saw outflows to the tune of Rs 777 crore, Rs 213 crore and Rs 136 crore, respectively, during the month under review. However, equity linked saving schemes (ELSS) attracted Rs 587 crore.

"The flows into ELSS category was the highest during the month. The reason for the same could be two fold. With the date for making tax saving investments extended due to COVID-19 pandemic and ensuing disruptions, investors got more time in hand to plan their tax saving investments and are now investing," Srivastava said.

"Additionally, with markets at attractive levels, many investors would have already started their tax saving investments for the current financial year, which is a positive trend," he added.

Inflow through systematic investment plans (SIP) dropped below Rs 8,000 crore for the first time since November 2018. Net investments through such route stood at Rs 7,927 crore in June as against Rs 8,123 crore in May.

"The monthly SIP contribution slowing down is worrying, but it is not completely unexpected given the strain on cash flows and incomes experienced by many investors on account of the COVID-19 situation. Once the economic situation improves, the flows should also pick up," Pradeepkumar said.

Amfi CEO N N S Venkatesh said, "Mutual fund SIP investors may have opted for pause facility and we should see SIP contribution surging in Q4CY20."

Fixed income securities or debt funds saw an inflow of Rs 2,862 crore in June.

Among fixed income securities, liquid funds saw withdrawal of a massive Rs 44,226 crore as compared with an inflow of Rs 61,871 crore in the preceding month. However, credit risk funds saw an outflow of Rs 1,494 crore in June, much lower than withdrawal of Rs 5,173 crore in May and Rs 19,239 crore in April.

Gold ETFs saw an inflow of Rs 494 crore last month as compared with Rs 815 crore inflow in May.

The assets under management of the 45-players mutual fund industry rose to Rs 25.5 trillion at the end of June from Rs 24.55 trillion in May-end.

"Reducing interest rates, gradual unlocking of economic activity with expected return to normalcy has seen renewed buoyancy in markets leading to mutual funds AUM crossing Rs 25 trillion mark," Venkatesh said.