Both inflows and redemptions in equity mutual fund schemes have fallen sharply in the last few months. Between March and July, investors have redeemed their units to the tune of Rs 18,401 crore, while inflows were at Rs 25,346 crore.
According to data compiled by the Association of Mutual Funds in India (Amfi), the inflow numbers have been falling consistently since January, when they stood at Rs 12,717 crore. In July, it fell to a mere Rs 2,538 crore. Now, the preferred route of investment seems to be income funds. In July, they garnered Rs 8,640 crore.
Redemptions have also seen a sharp fall. While in March they were at Rs 5,660 crore, in July, they dipped to Rs 2,483 crore.
The sharp fall in the stock markets since January has been the main reason for investors’ lack of confidence. Apprehensions continue that there could be a further market downslide.
With the sharp market fall, the net asset values (NAVs) of equity funds have also taken a serious knock. Retail investors, who lost money in some of these funds, are now unwilling to put in any more money. The approach of fund managers has also been quite defensive, with many willing to sit on cash, rather than take a wrong call on markets.
Nilesh Shah, deputy managing director, ICICI Prudential Mutual Fund, says, “It takes time to shed fear. Investors mostly come during a sustained rally, but now, markets are far from being stable. As a result, investors have become reluctant and are not investing as aggressively as a year ago.”
Besides the fall in markets, the number of new fund offerings (NFOs) in equity funds has also dried up significantly. According to market experts, since January, when Reliance Natural Resources Fund was launched, there have been few NFO launches.
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At present, there are few products in the market that could enthuse the investor. Retail investors look for monthly income and regular returns option, which is not to be found. The fixed maturity plans (FMPs) are good for only high net-worth individuals (HNIs). For the retail investor, there isn’t much of a choice, according to Rajivdeep Bajaj, managing director, Bajaj Capital.
However, the good part is that the inflows are still on the positive, despite a 40 per cent fall in the benchmark indices. “Unlike crashes earlier, some investors have continued buying at lower levels and corrections this time,” said Dhirendra Kumar, CEO, Value Research, a mutual fund research firm. Another reason for good positive inflows is because many investors have adopted the systematic investment plan (SIP) route where one has to keep on investing over a period of time for good returns.