Net outflows from credit risk funds jumped over threefold in the month of May as investors remained wary of the segment in the light of recent downgrades and defaults.
The overall inflows into the debt funds segment also took a huge hit in May even as the overall assets under management of the mutual fund industry registered a marginal increase on the back of inflows into equity schemes.
According to data from the Association of Mutual Funds in India (AMFI), credit risk funds saw net outflows of ₹4,156 crore in May, as against ₹1,253 crore in April.
Further, the net inflows into the overall debt funds segment fell significantly from ₹1.21 lakh crore in April to ₹70,119 crore in May.
Interestingly, the debt segment took a hit amidst a slight increase in the industry’s total AUM that was pegged at ₹25.43 lakh crore in May, as against ₹25.28 lakh crore in the previous month.
Industry experts believe that while investors are likely to be sceptical of investing in credit funds, the income and gilt categories could see a jump in inflows on the back of favourable macro-economic factors.
“If it [investment] is relating to credit funds, then investors will review or evaluate the opportunities,” said N.S. Venkatesh, chief executive officer, AMFI.
“However, gilt and high quality income funds should see more flows with the central bank cutting rates while changing its stance from neutral to accommodative. Interest rates are expected to come down so more funds could flow towards such schemes,” he added.
Equity inflows rise
Meanwhile, equity funds registered a notable rise in the net inflows with open-ended equity oriented schemes seeing net inflows of ₹5,407.75 crore in May, as against ₹4,608.74 crore in the previous month.
This assumes significance as the net inflows into equity schemes in the previous month had fallen to their lowest level since September 2016.
According to Mr. Venkatesh, the flows into equity schemes are likely to revive going forward as uncertainty related to election results are over and the recent market movement also points towards increased investor confidence.
“The market is already cheering the formation of the new government. Macro-economic factors appear to be favourable with low inflation, high reserves and balance of payments under control. Reserve Bank of India has also changed its stance, which is likely to see more flows coming into mutual funds,” he said.
Incidentally, inflows through systematic investment plans (SIPs), which largely reflect retail flows into equity schemes, registered an increase in May with the total number of SIP folios rising to 2.69 crore even as the net flows through SIPs declined marginally from ₹8,237 crore in April to ₹8,183 crore in May.