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In December 2013, mutual funds saw the highest inflows into equity schemes in 27 months, as the broad-based rally in stocks prompted retail investors to pour money into these products. Aggressive selling of various close-ended equity schemes also contributed to fresh flow of money into them.
In December 2013, net investment into equity funds surpassed Rs 1,000 crore, the highest since September 2011. This is a relief for the mutual fund industry, which saw redemptions from equity schemes for most of 2013. Total net outflows from equity schemes in 2013 (including December) was about Rs 8,700 crore.
“Money has come in the value funds and also those which gains out of volatility. Mark-to-market gains have also helped the growth of equity assets,” said Nimesh Shah, CEO of ICICI Prudential Mutual Fund.
Gross fresh equity sales stood at Rs 5,301 crore in December 2013 — the highest since August 2011. Against an average monthly sales of Rs 3,000 crore, the latest sales figure is a big jump for the industry.
The recent poor performance of gold and real estate as an asset class has made investors look at equities, which picked up in the last four months of 2013. From September 2003 to date, mid- and small-cap shares have outperformed benchmark indices. During the period, the BSE Mid-cap has risen by about 27 per cent, while the CNX Mid-cap has rose by 21.5 per cent. The BSE Small-cap index gained 28 per cent, while the CNX small-cap index has risen by 31 per cent. Benchmark indices BSE Sensex and the NSE Nifty rose 13-16 per cent in the period
There is a general feeling among investors that the worst seems to be over and that's why there is a renewed interest in equities, says Akshay Gupta, managing director of Peerless Mutual Fund.
However, mutual fund industry officials said it is too early to conclude whether the inflows in December would extend.
“Although the recent inflows number in equities look good, investors are still wary of investing in equities,” said Gupta.
According to mutual fund industry officials, a long-term revival is unlikely unless investors shift money from fixed-income products to equities.
High interest rates and hazy equity market outlook are likely to result in investors sticking to fixed income products.
“It’s incorrect to say there is a shift from debt schemes to equities. Rather, investors are gradually warming up towards equities and there has been relatively less redemptions. The trend is changing and investors cannot remain under-weight for too long,” says A Balasubramanian, chief executive of Birla Sun Life Mutual Fund.
Balasubramanian said new investors coming in to equities. He added there is a slight trend wherein investors are also evaluating their fixed income investments and are slowly getting into equity via systematic transfer plans.
