Selling in debt and balanced MFs eclipses equity inflows

MUMBAI: February wasn’t the best month for India’s mutual fund industry. Escalating tensions along the north- western border, uncertainties about the outcome of the general elections and concerns over mounting corporate debt prompted outflows from the nation’s favourite savings instrument.

Balanced, liquid, income and gilt funds saw exits that overshadowed fresh investments in equity schemes and ELSS funds.

In total, the industry shed assets worth Rs 20,083 crore in February, taking aggregate funds under management to Rs 23.16 lakh crore. ELSS drew investors as savers sought to meet the tax benefit deadline of March 31.

“Growth in retail participation in equity is still on track,” said Vishal Kapoor, CEO, IDFC Asset Management Company.

Inflows into systematic investment plans (SIP) continued to be resilient, with collections through this mode outnumbering those for January.

Inflows through SIPs touched an all-time high of Rs 8,095 crore — Rs 31 crore higher than January — and the industry added 2.5 lakh SIP accounts.

Historically, about 90% of the money coming through SIPs is invested in equity oriented schemes. Despite negative returns over the past one year in several equity mutual fund categories such as midcap and small cap, retail investors appear to have remained patient.

“Amid the global uncertainty, tensions on the border, the liquidity tightness and credit events, the retail investment behaviour is quite heartening,” said NS Venkatesh, CEO, AMFI.

Wealth managers believe many retail investors are now buying SIPs after careful planning, linking investments to long-term goals. That explains their commitment.

“There is a sense of maturity among SIP investors. Retail investors have become mature and patient, and there is no knee-jerk reaction even though the markets have been weak,” said DP Singh, executive director, SBI Mutual Fund.

However lump-sum investments into mutual funds slowed down primarily due to border tensions and elections.

Retail assets during the month, including equity funds, balanced funds and ELSS funds, saw inflows of Rs 4,048 crore, the lowest since June 2016, when the industry saw inflows of Rs 2,722 crore.

“Many high net worth investors have added money in mid and small cap funds and are seeing negative returns from such funds. These investors want to see money made in these funds before putting more cash into equities,” said Akhil Chaturvedi, associate director, Motilal Oswal Asset Management.