Investors sinking lump sum money in equities seem to have applied the brakes, reports Jash Kriplani.
The mutual fund industry witnessed deceleration in equity inflows for the third straight month in January.
Inflows into equity schemes, which include tax-saving schemes, stood at Rs 6,158 crore last month.
This was the lowest since the Rs 6,462 crore recorded in February 2017.
Equity inflows in January 2019 were 42% lower than the last 12 month average of Rs 10,594 crore.
Market players say volatility in the broader market and sharp sell-off in indebted companies could have hurt investor sentiment.
"The monthly data shows there are reasons to be worried on the equity side.
Of the Rs 6,000 crore of equity flows, the data shows Rs 2,000 crore has come through new fund offers," says Aashish Somaiyaa, managing director and chief executive officer, Motilal Oswal MF.
"After the rationalisation of schemes, there is a limit on the number of schemes that can be launched each month," Somaiyaa adds.
Another disappointing trend was outflows from balanced schemes.
According to data released by the Association of Mutual Funds in India, the category saw the first month of outflow since May 2014.
The outflow stood at Rs 952 crore in January.
However, there were some positives in the monthly numbers.
The income category, which has been hit owing to volatility and credit events in debt markets, saw an inflow of Rs 2,080 crore after eight months of outflows on the trot.
Market participants expect the flows to improve on the debt side.
"With the RBI easing the rates, we expect inflows to rise in the coming weeks," says N S Venkatesh, chief executive officer, Amfi.
Investors sinking lump sum money in equities seem to have applied the brakes, but inflows through systematic investment plans (SIPs) continued to grow at a good clip.
SIPs in January stood at Rs 8,063 crore, marginally high compared to the previous month.
"Despite acute market volatility owing to credit events and global uncertainty, retail Investors continue to repose their faith in the India growth story. This is evident from the SIP flows and folio numbers, which continue to rise sequentially," Venkatesh adds.
The mutual fund industry saw an inflow of Rs 65,439 crore as against an outflow of Rs 1.36 trillion seen in December.
Inflows into the liquid fund category stood at Rs 58,637 crore, which pushed up the overall tally for the industry.
The broader market conditions remained weak in January even as the benchmark indices found support from a select set of companies.
The Nifty Midcap 100 was down 5.43% while the Nifty smallcap 100 was down 4.9% during the month.
Meanwhile, the BSE Sensex was up 0.52% while the Nifty 50 saw a marginal fall of 0.29% during the month.
Assets under management (AUMs) for the industry stood at Rs 23.4 trillion in January compared to Rs 22.9 trillion at the end of the previous month.
Total equity AUM dipped marginally to Rs 7.74 trillion.
Illustration: Dominic Xavier/Rediff.com