Arbitrage funds have recorded net inflows for three months straight, after steep outflows for half a year before that. The trend changed as mutual fund (MF) schemes improved amid a rise in equity market volatility. Investors redeemed over Rs 31,000 crore from arbitrage schemes between June and November before putting in Rs 3,000 crore in the last three months, shows data from the Association of Mutual Funds in India (Amfi).
MFs have benefited from a shift to financial assets from physical assets like real estate and gold.
Dhaval Kapadia, Director, Portfolio Specialist, Morningstar Investment Adviser (India) answers queries
While the number of international MF schemes is increasing, so is the confusion for investors.
Do a proper asset allocation and invest through systematic investment plans where one can benefit.
Taking credit risks in shorter-tenure funds can help jack up returns considerably, boosting sales.
Analysts say those taking exposure through stocks could look at firms focused on domestic business
This is aimed at improving liquidity in all schemes and would help them to meet sudden redemption pressures, said Sebi chairman Ajay Tyagi.
Market players say following the tax cuts, the market mood had changed from bearish to positive, which should help sustain the rally.
Arbitrage schemes can give investors better post-tax returns than debt funds.
They help diversify portfolio and are less risky.
The number of equity schemes rose to 562 from 519 two years ago. Equity NFOs, in fact, have mopped up more than Rs 16,000 crore since 2018 - 2.7 times the Rs 5,948 crore collected in the preceding three calendar years.
Go for open-ended scheme that allows redemption, in case the fund does not perform
You can look at equity-oriented balanced funds.
While there's tax arbitrage advantage in ULIPs now, experts say investors should prefer mutual funds for long-term savings.
Balanced funds are suitable for investors who have low-risk appetite or are new to equities.Those with more than seven-year investment horizon should look at funds that have higher equity exposure.
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