Mutual fund has now become industry with Rs.25 lakh crore AUM

The new financial year got off to a good start with mutual fund average AUM now standing tall at Rs.25.28 lakh crore in April 2019. Analysis of the latest AMFI data shows that 92% of the industry’s assets (Rs.23.27 lakh crore) are spread across 899 open-ended schemes while only 8% (around Rs.2 lakh crore) are invested in a mix of close-ended and interval schemes.

The month saw healthy inflows of Rs.1 lakh crore fuelled by strong inflows of close to Rs.90,000 crore in liquid funds. A similar trend was also seen in scheme categories taking exposure to low duration. The combined inflows in overnight, ultra-short duration, low duration, money market and short-term funds was over Rs.25,000 crore. Investors also flocked to credit safety with corporate bond funds (which have major exposure to AAA and AA+ rated debt) while bank and PSU debt funds saw combined inflows of Rs.6,667 crore. In the debt basket, credit funds saw highest outflows of Rs.1,253 crore. AMFI CEO, N.S. Venkatesh, attributed this to investors turning cautious in the aftermath of credit events, rating downgrades and defaults.

On the equity front, the data was more subdued as there was a dip in total flows. Open-ended equity funds (all 10 categories as per SEBI classification) saw inflows of just Rs.4,609 crore last month.  According to Venkatesh, global trade imbalance and uncertainty over the outcome of the general elections have led to investors getting into a wait-and-watch mode. He expects investors to increase their equity investments substantially once corporate earnings improve and uncertainty surrounding elections and global headwinds recede. On a more positive note, Venkatesh shared that SIP contribution continued to increase meaningfully in April. SIP contribution for April 2019 stood at Rs.8,238 crore, an increase of Rs.183 crore compared to the month before. According to Venkatesh, anecdotal evidence suggests that 92% of the SIP flows come into equity funds, thus, this increase in SIP contribution is reflective of the overall retail investor confidence in the India growth story.

Under other open-ended fund categories, hybrid funds saw some outflows on account of redemptions from the aggressive hybrid funds (previously known as balanced funds) category. The category continues to be under stress after dividend distribution tax was introduced in equity funds.

Solution oriented funds saw marginal inflows while other funds category reported outflows of Rs.4,230 crore as other ETF category faced large redemption.

Close ended and interval funds together contributed Rs.19,381 crore of outflows as many FMPs came up for maturity in the first month of the financial year to maximise tax benefit.

Overall, we see interest in debt reviving especially in the lower end of the duration bucket and high credit quality funds. Equity funds are seeing some sluggishness amidst volatile markets, however, strong SIP flows indicate that retail investors continue to invest in equities to fulfil their long-term goals.

Inflow/outflow in Rs.crore

Source: AMFI