Inflows into equity mutual funds slow, as investors wait

MUMBAI: Inflows into domestic equity mutual funds which acted as a sharp counter to FII inflows in 2015, have slowed down in January. Data from AMFI shows that the net inflows into equity mutual funds fell to Rs 2128 crore, the lowest inflow since April 2014. The AUM of the mutual fund industry, as a whole, declined marginally by Rs 1,121 crore to Rs 12.73 lakh crore in January from 12.74 lakh crore in December.

Returns from large cap equity mutual funds have been negative for one year, worrying investors. Data from Value Research suggests that returns from large cap equity funds have lost 12%. Retail investors who typically see past returns before investing, are worried about these negative returns. The slide continued in January, with the Nifty falling a sharp 6%. Sliding oil prices, a slowdown in China, the world’s second largest economy, and lower corporate earnings have led to sharp volatility in the stock markets. Distributors believe that a combination of these factors has led to low inflows during January.

“Earnings has not revived, they are still in low single digits. Investors are worried about the impact of low oil prices, meltdown in China, and how the Union Budget later this month,” says Ashish Shanker, Head (Investment Advisory), Motilal Oswal Wealth managers. In the absence of triggers he believes investors could take profits especially in mid cap funds where valuations are high and they could see redemptions.

“Given that there are no immediate triggers, investors are postponing their lumpsum investments or staggering them over the next three to six months,”says Anup Bhaiya, MD and CEO, Money Honey Financial Services, a Mumbai based financial distributor.