MF AUM stays the same in June

After witnessing sustained inflows, the industry saw marginal outflows from equity funds in June. The latest AMFI data shows that equity funds have witnessed net outflows of Rs. 45 crore in June. However, if we include ELSS and ETFs, equity as a category, has received net inflows of Rs. 1,329 crore in June. ETFs which track equity indices, have witnessed healthy inflows of over Rs.1,000 crore in June.

The last time equity funds saw net outflows was in March 2016 (Rs. 3,206 crore) on account of profit booking.

Jimmy Patel, CEO, Quantum MF is of the view that the reflection of marginal outflow in equity funds is due to arbitrage funds. “A lot of corporates have started using arbitrage funds as a quasi-liquid fund instrument because of tax advantage. These investors usually come with a short term horizon of a month.”

Aashish Somaiyaa, MD & CEO, Motilal Oswal MF attributed this marginal outflow to redemptions by investors who had invested in equity funds in July-August 2015. “If you look at last year’s AMFI data, the industry had received record inflows in July and August. The redemption has largely come from these investors who had invested during market rally with a short term horizon. These investors would have witnessed negative returns in January and February. Hence, they have exited after the markets bounced back in June.”

As a result, the AUM of equity funds, including ELSS and ETFs, grew by 3% from Rs. 4.33 lakh crore in May to Rs. 4.47 lakh crore June.

This trend was similar in balanced funds category. Balanced funds received Rs. 2,402 crore in June. Nimesh Shah, MD and CEO, ICICI Prudential said, “I believe that the equity market is fairly valued at this moment and investors are taking the balanced fund route to invest in mutual funds.”

He says that investors should invest in dynamic asset allocation funds as these funds are best placed to invest in equity markets when valuations are cheap and increase their exposure in debt when markets are overvalued.

Among the debt fund category, income funds received net inflows of Rs. 1,697 crore in June. As a result, the AUM in this category increased by 1% from Rs. 6.11 lakh crore in May to Rs.6.17 crore in June. Income funds now constitute 45% of the total Rs. 13.81 lakh crore industry AUM as on June 2016.

However, liquid witnessed net outflows of Rs. 26,847 crore in June. Typically, corporate investors invest in liquid funds in the beginning of a quarter and exit during the quarter end.  

All in all, the industry’s AUM dipped marginally from Rs. 13.81 lakh crore in May 2016 to Rs.13.80 lakh crore in June due to outflows from liquid funds.

Net inflow/outflow in June

Source: AMFI