 "Mutual fund inflow in equity at 19-month low in December")
The inflows from India’s retail investors in equity schemes remained in positive territory for a 20th month in a row in December. Though positive, it was also the lowest in these months at Rs 3,644 crore, less than half the average monthly inflow year 2015 witnessed.
The loss of pace of inflows came in a month marked with steep volatility. BSE's 30-stock-index Sensex had at one point lost 1,600 points or 3.4 per cent. However, in the latter part, the market nearly recovered all its losses.
Investors redeemed units worth Rs 9,765 crore, the highest in recent months. Falling gross sales of equity schemes dented net inflows, the lowest since June 2014. Though, the year witnessed a record net inflow of Rs 90,000 crore, weakening statistics in the past few months might be a worrisome signal.
Milind Barve, managing director and chief executive of HDFC Mutual Fund, says, “There had been several holidays in the past few months, which could have reduced the inflows. However, it is too short a period to call it a trend. Year 2015 was unprecedented in terms of any calendar year. And there is no reason why inflows will not come to equity mutual fund schemes.”
Volatility in the market tends to keep several investors away. With majority of the fund managers expecting 2016 to be volatile and expecting no good returns, it will be a test for the sector. Already, many of the fund houses have started pushing for balanced advantage funds to investors. According to them, in a volatile year, such funds tend to weather the market swings.
S Naren, chief investment officer (CIO) of ICICI Prudential MF, says, “We recommend defensive equity investing with products, in the balanced and dynamic asset allocation category as suitable ways to ride the volatility. These funds invest in equities when the markets are cheap and book profits when the markets are rising, limiting risk and aiming to provide good returns.”
Already, there is a surge in investors' money flowing into balanced funds. Thus far in the current financial year, the category has seen inflows of worth Rs 17,844 crore. Interestingly, in December, the flows in balanced funds surpassed that in equity funds as the category received around Rs 4,500 crore.
The equity segment saw sales of a whopping Rs 1.72 lakh crore in 2015 against Rs 1.2 lakh crore of sales in 2014. There were months that saw sales jump to as high as Rs 18,000 crore. With physical assets such as gold and real estate remaining poor in terms of returns for the past couple of years, equity emerged the single asset class that retail investors flocked to in the year. This helped the sector gain record Rs 13 lakh crore in size.
Fund managers, amid robust inflows, used the correction in markets as opportunities and pumped about Rs 72,000 crore in stocks. Currently, there are about 460 equity-oriented schemes managing assets worth Rs 4.06 lakh crore.
