Net inflows into equity mutual funds stood at Rs 240.55 crore in June 2020, which is the lowest in 51 months. Even inflows even through systematic investment plans (SIPs) slowed down marginally after remaining resilient through the pandemic.
Market participants attribute the fall in equity inflows to ongoing pandemic, coupled with economic uncertainty and poor returns of mid and small cap funds.
Inflows through SIPs in June stood at Rs 7,927.11 crore. In all the months of the previous fiscal, inflows through SIPs were above Rs 8,100 crore. Even in April and May this financial year, SIPs’ contribution was Rs 8,376 crore and 8,123 crore, respectively.
Despite Sensex giving returns of over 7.7% in June, market participants are expecting outflows from equity funds as several investors have redeemed their mutual fund investments. “There is lot of uncertainty due to the novel Coronavirus and its overall impact on the economy. While many investors have taken advantage of rising markets by booking profits, many are waiting on the sidelines and are not committing fresh money in equity funds,” said the CEO of a leading fund house. He added that weak performance of equity funds, especially midcap ones, was one of the reasons for outflows in June.
Slowdown in the economy has started to hurt even high net worth individuals (HNIs) as they continued exiting equity funds in the past two-three months, said industry officials. Data from the Association of Mutual Funds in India (Amfi) show that multicap funds and largecap funds saw net outflows of Rs 777.60 crore and 212.78 crore, respectively, in June.
According to G Pradeepkumar CEO of Union AMC, slowig down of the monthly SIP contribution is worrying, but not completely unexpected, given the strain on cash flows and income experienced by investors on account of Covid-19.
According to industry officials, 9.08 lakh new SIPs were registered in June while 6.57 lakh SIPs were discontinued or their tenure got completed.
However, equity linked saving schemes, focused funds and smallcap funds continued to see net inflows in the range of Rs 250-590 crore in June. Debt funds saw inflows of Rs 2,861.68 crore in June.
Overall, the MF industry saw net inflow of Rs 7,265.68 crore during the month under review.