MF industry sees record net equity inflows of Rs.29,000 crore in September

Investors are taking advantage of the downfall in the equity markets to accumulate units of equity funds.

Despite volatility, the mutual fund industry has witnessed impressive net inflows of Rs.29,045 in equity funds including pure equity funds, balanced, ELSS and equity ETFs in September. However, equity funds had received the highest net inflows of Rs.30,658 crore in August.

The total equity AUM has increased by Rs.25,000 crore to reach a record high at Rs.8.49 lakh crore in September.

In the pure equity funds category, the industry has received Rs.18010 crore in September. Industry officials attribute this to increased participation of investors through equity funds as and when markets decline and inflows in arbitrage funds.

Balanced funds followed pure equity funds. Investors have put Rs.8,141 crore in balanced funds in September. The AUM of balanced funds has reached Rs.1.35 lakh crore. Industry officials are of the view that most of the inflows in balanced funds is due to increasing participation of HNIs through balanced advantage funds.

Manoj Nagpal of Outlook Asia Capital believes that the healthy inflows in equity funds is due to increased inflows in mutual funds through SIP. In addition, many investors who waited for the markets to correct have invested in equity funds when the market touched its month low in September.

Another factor that has contributed to the growth of equity AUM is the inflows in arbitrage funds. “Since spreads in the derivative markets are attractive, investors have put money in arbitrage funds. In arbitrage funds, one can estimate returns every month based on spreads. Large investors like corporates and HNIs use this strategy to park money in arbitrage funds for short term. Currently the spread is around 6.5%. In my view, the industry will continue to get inflows in arbitrage funds as spreads will remain attractive till the markets take a bearish turn,” said Nagpal.

Overall, the AUM of the MF industry declined to Rs.20.40 lakh crore in September, from Rs.20.59 lakh crore. The AUM fell marginally, by Rs.19,000 crore, during the month, mainly due to the net outflows in debt funds. The outflows in the income, liquid and gilt funds led to a fall in the assets of debt funds.

Experts say that corporate and institutions generally redeem their investments at the end of a quarter from the debt funds to pay advance tax. However, they say that equity assets or the long-term assets signify the overall sentiment of investors.

Net inflows outflows in September 2018

Source: AMFI