Equity mutual fund schemes have seen a massive fall in net inflows in June as compared to the previous month. Though inflows remained in the positive zone, yet they plunged to a mere Rs 20 crore as against Rs 1,546 crore in May, one of the highest in recent times.
Fund managers say the Greece crisis, coupled with talk of the Mauritius tax treaty being under review, hit the retail investors’ participation in equity markets through mutual funds in June.
Investors redeemed a large chunk of funds amid the uncertainty hovering over domestic equity markets during the month. If net outflows of Rs 80 crore in the equity-linked-saving-schemes (ELSS) are taken into consideration, the overall flows in the equity category were in the negative zone. In June, ELSS witnessed a net outflow of Rs 80 crore.
| CASH-STRAPPED Net inflow/(outflow) in different fund categories in June | |
| Category | Net inflow/(outflow) |
| Income | (16,564) |
| Equity | 20 |
| Balanced | 84 |
| Liquid/Money market | (45,814) |
| GILT | (88) |
| ELSS-equity | (80) |
| Gold ETFs | (252) |
| Other ETFs | (210) |
| Fund of funds investing overseas | (42) |
| All figures in Rs crore Source: Association of Mutual Funds in India | |
Gopal Agrawal, chief investment officer (CIO) at Mirae Asset Global Investments (India), says, “During the early part of the month, equity markets were moving only one way: down. Benchmark indices witnessed sharp fall which resulted into redemption and investors held back their investments.”
Equity MFs had seen record net outflows of around Rs 13,500 crore in FY11. At the beginning of the current financial year, too, the industry saw Rs 1,076 crore as the net outgo from equity schemes. Industry experts had pointed out that the pain of equity MFs was not over yet.
But in May, when fresh fund inflows were over Rs 1,500 crore, fund managers had said investors’ appetite for equity investment was building up. Poor inflows in June have once again brought the industry back to square one. “Redemption from equity funds has become a big concern for the industry,” says R S Srinivas Jain, chief marketing officer at SBI Mutual Fund.
According to Nandkumar Surti, CIO at JP Morgan Asset Management, “Apart from global issues such as Greece and Portugal, domestically, inflation is the main concern. The coming two quarters’ earnings outlook does not look great for corporate India. Investors redeemed in June. However, investments through the systematic investment plans (SIP) route are continuing. But, investments through lump sum amounts seem to have paused.”
Fund managers say investors are showing more inclination towards fixed-maturity products (FMPs) amid a shrinking risk premium as equity markets fail to deliver. Jimmy Patel, chief executive officer, Quantum Asset Management, says: “FMPs are offering 10 per cent returns, so investors are turning towards safer avenues.”