Net inflows in equity funds halved in just a year. AMFI’s latest data shows that the industry witnessed a massive decline of 56% in equity net inflows last fiscal.
The industry saw equity net inflows reduced to Rs.1.1 lakh crore in FY 2018-19 from Rs.2.6 lakh crore in FY 2017-18.
Equity funds include pure equity funds, arbitrage funds, ELSS and balanced funds. All the categories recorded a decline in net inflows due to volatility in equity markets and regulatory changes such as upfront commission ban.
Among equity funds, balanced funds saw the sharpest decline in inflows in absolute terms. Net inflows into this category fell to Rs.6,865 crore in FY 2018-19 from a whopping Rs.89,757 crore in FY 2017-18.
Similarly, in percentage terms, inflows in arbitrage funds plunged by nearly 120% compared to last year. Arbitrage funds registered an outflow of Rs.3,888 crore in FY 2018-19, against inflow of Rs.20,515 crore in FY 2017-18.
Over the past few years, investors flocked to balanced and arbitrage funds on expectations of dividends. However, the introduction of a dividend distribution tax in equity funds has discouraged investors from investing in these categories.
Pure equity and ELSS schemes also saw a decline in net inflows.
Net inflows in equity funds fell to Rs.12,771 crore in FY 2018-19 from Rs.14,316 crore in FY 2017-18. While for ELSS the number came down to Rs.99,087 crore from Rs.1,36,238.
Radhika Gupta, CEO of Edelweiss Mutual Fund believes that the move to ban upfront commission affected equity inflows. She said, “FY 2018-19 was a tougher year in terms of market volatility. Further, the balanced category took a hit after taxation on dividend came into play. Then the third thing was regulatory changes, especially the decision to do away with upfront commission.”
A fall in lumpsum investments was also a crucial factor for lower net inflows in FY 2018-19. “While the growth of SIP inflows has slowed, lumpsum investments in the industry have reduced quite sharply. The fundamental reason for this was volatility in equity markets across the globe including India,” said Ashutosh Bishnoi, MD & CEO, Mahindra MF.
A lacklustre performance by mid-cap and small-cap stocks in FY 2018-19 was also a crucial factor for the decline in equity net inflows. “Performance of mid-cap and small-cap funds were not encouraging last year. That led to considerable redemption pressure,” said Amit Bivalkar of Sapient Wealth.
Yearly inflow
|
Category |
Net flow in FY 19 (Rs. crore) |
Net flow in FY 18 (Rs. crore) |
Change (Rs. crore) |
Change in % |
|
Pure equity |
99,087 |
1,36,238 |
(37,151) |
-27% |
|
Arbitrage |
(3,888) |
20,515 |
(24,403) |
-119% |
|
Balanced |
6,865 |
89,757 |
(82,892) |
-92% |
|
ELSS |
12,771 |
14,316 |
(1,545) |
-11% |
|
Total |
1,14,835 |
2,60,826 |
(1,45,991) |
-56% |
Source: AMFI
