With the Narendra Modi-led coalition getting a clear mandate, retail investors increased their allocation to equity
mutual funds in the immediate aftermath of the Lok Sabha election results.
But routine withdrawal from
liquid funds by banks to meet quarterly capital adequacy norms led to outflows of Rs 1.52 lakh crore, causing
assets under management (AUM) for the industry in June to decline 6.5 per cent to Rs 24.25 lakh crore in May.
However, the overall average assets under management (
AAUM) for June stood at Rs 25.81 lakh crore, which was higher than Rs 25.43 lakh crore in May and Rs 25.27 lakh crore in April 2019. Investors continued to show their trust in SIPs, with collections through this mode at Rs 8,122 crore.
Wealth managers said that political stability, low inflation, central bank rate cuts, expectations of normal monsoons, and a revival in corporate earnings led retail investors to increase their allocation to equity mutual funds.
“Confidence was back among investors and they started allocating to equity mutual funds,” said A Balasubramanian, CEO, Aditya Birla Sunlife Mutual Fund.
Investors made higher allocation to largecap and multicap funds as compared to mid and smallcap funds. Investors put in ₹1,835 crore into multicap funds and ₹1,510 crore into largecap funds in June, compared with ₹648 crore and ₹53 crore in May 2019.
“Within equities, multicap and largecap categories gained significantly while arbitrage, small and midcap funds maintained their growth over the last few months. It is also good to see the SIP book sustaining at ₹8,122 crore and the folio numbers of live SIPs going up by 3.88 lakh,” said Vishal Kapoor, CEO, IDFC AMC.
On the fixed income side, although there is an outflow from liquid schemes, flows into gilt schemes and long-duration schemes have stood positive owning to the RBI’s dovish stand on interest rates.
A number of downgrades in the fixed income space led to risk aversion among investors, with many choosing to stay away from credit risk funds and be in safer categories. The category saw investors withdraw ₹2,695 crore.
“The ouflow from liquid funds is the usual quarter-end phenomenon where the industry witnesses temporary redemptions,” said NS Venkatesh, CEO,
AMFI.
Flow break up
Net inflows in equity mutual funds (in Rs crore)
| Fund category |
April 2019 |
May 2019 |
June 2019 |
| Multi Cap |
1,873 |
648 |
1,853 |
| Large Cap |
48 |
53 |
1,510 |
| Large & Mid Cap |
-20 |
278 |
489 |
| Mid Cap |
491 |
1,273 |
845 |
| Small Cap |
956 |
1,416 |
927 |
| Focused |
228 |
1,200 |
650 |