Inflows in balanced funds higher than equity funds: AMFI

Balanced funds are the flavor of season. AMFI data shows that net inflows in balanced funds stood at Rs. 3,275 crore in September which is higher than equity funds, excluding ELSS and index ETFs. Equity funds received net inflows of Rs. 3,248 crore in September, slightly less than balanced funds.

This is the highest monthly inflow this calendar year. Last year, in December, the industry received net inflows of Rs. 4,500 crore in balanced funds.

One reason behind this trend could be the impact of change in tax structure of debt funds. Many investors have turned to balanced funds after the changes in tax structure of debt funds.

The higher inflows in balanced funds is evident by the spike in folios in this category. SEBI data shows that the total folios in balanced funds increased from 24.90 lakh in March 2016 to 28.60 lakh in September 2016, an addition of almost 4 lakh folios in just 6 months.

Experts say that investors are moving to balanced funds because of expensive valuations in the mid and small cap sectors. “Lump sum money has been moving to balanced funds due to the higher valuations of equity markets,” said Manoj Nagpal, CEO, Outlook Asia Capital.

Equity funds

Though inflows in equity funds slowed down in September compared to August, the good news is that a large part of inflows have come into pure equity funds and ETFs.

The industry has received net inflows of Rs. 5,250 crore in September in equity funds, including ELSS and ETFs. Last month, the industry has received over Rs. 10,000 net inflows largely on account of inflows in arbitrage funds. AMFI data shows that the industry had received net inflows of Rs. 5,700 in arbitrage funds in August.

Industry experts say that there has been an outflow in arbitrage category in September. “Since spreads in the derivative markets have narrowed, investors have shunned arbitrage funds. In arbitrage funds, one can predict the expected returns every month on the basis of spreads. Large investors like corporates and HNIs use this strategy to park money in arbitrage funds for short term,” said Nagpal.

Another healthy trend was observed in ETFs which track the equity indices. The category has got inflows of Rs. 1,533 crore in September. Experts say that the participation of EPFO in equity through ETFs route has helped this category grow.

Meanwhile, gold ETFs have witnessed outflows of Rs. 77 crore in September. Experts attribute this drop in folios to profit booking on account of the recent increase in gold prices and increasing popularity of gold sovereign bond funds.

Overall, barring income, gilt and FOF investing overseas, all other categories received positive net inflows The total assets under management of the industry went up from Rs. 15.63 lakh crore in August to Rs. 15.80 lakh crore in September.

Monthly inflows/outflows in September

Source: AMFI