Investor flows in equity MFs at hit 16-month at Rs 9,400 crore

Inflows into mutual fund (MF) equity schemes saw a sharp surge in October amid weakness in the secondary market. Equity schemes attracted net inflows of Rs 9,400 crore, most since July last year.

Inflows in October were three times that in September and also three times the monthly average for the first half of 2016-17.

Experts say correction in the stock prices from their September highs spurred investor buying.

"October was a relatively better month. Correction in the market was used as an opportunity by investors who for additional purchases, a sign of maturing investors. The monthly systematic investment plan (SIP) book is increasing and money has continued to flow in from smaller centres, said Sundeep Sikka, chief executive officer (CEO) of Reliance Nippon Mutual Fund.

 

Industry officials say average monthly inflows through so-called SIPs are around Rs 3,500 crore.

Equity assets under management (AUM) at the end of October was at Rs 5.25 lakh crore, whereas in September it was at Rs 5.05 lakh crore.

"We believe that investors should use any sharp corrections in the equity markets to allocate large amount in a lump sum manner. This helps to lower the overall cost of acquisition and increases total exposure to the asset class at a good price," says Amit Nigam, head of equity at Peerless Mutual Fund.

Around Rs 2,000-2,500 crore of inflow last month were towards arbitrage funds, say industry officials, who are quick to add that flows were strong even otherwise.

"Even one takes out the arbitrage flows, the month was quite a strong one with nearly Rs 6,500 crore of net inflows from retail and HNIs," said head of operations at private bank-sponsored fund house. He further added that several corporate houses were shifting their investments from liquid funds to arbitrage segment to make better returns as they assumed arbitrage also to be a safer bet.

Since the beginning of the year, equity schemes have been struggling to improve the net inflow tally due to high redemptions. In some months, gross redemptions have been as high as Rs 10,000 crore. On the net basis, however, the industry has continued to show net flows thanks to the high gross sales.

The overall AUM in October stood at Rs 16.28 lakh crore against Rs 15.8 lakh crore in September.

Barring liquid and fund of funds which invest overseas, all other categories of funds saw positive inflows helping the month to close with a cumulative net inflow of Rs 32,334 crore.