Volatility in equity markets and concerns over economic growth dampened inflows into mutual fund schemes, including SIPs, in May.
Equity inflows fell to a one-year low, dropping 40 per cent month-on-month (m-o-m) to ₹22,908 crore in May from ₹38,440 crore in April, as investor sentiment was hit by a market downturn driven by persistent foreign portfolio outflows and heightened volatility, according to AMFI data released on Wednesday.
Hybrid schemes inflow nearly halved m-o-m to ₹10,560 crore ( ₹20,565 crore), while debt funds registered an outflow of ₹96,949 crore as against an inflow of ₹2.47 lakh crore in May.
SIP inflows also edged down to ₹30,954 crore ( ₹31,115 crore) with the number of contributing accounts slipping marginally to 9.64 crore (9.65 crore).
Investors’ confidence
Venkat Chalasani, CEO, AMFI said, “Despite the lower SIP, inflows remain above ₹30,000-mark reflecting investors’ confidence in MF.” He stated that while there are no absolute data, the majority of fresh SIP opened are from B30 (beyond top-30) cities, as investors look to reap the benefit of country’s long-term economic growth potential.
Archit Doshi, Senior Vice-President at PL (Prabhudas Lilladher) AMC, said, “The m-o-m decline in SIP contributions was marginal but marked a second consecutive drop, following a 3 per cent decline in April, signalling a cause for concern.”
With flat to negative returns observed in several SIP vintages over the last one-two years, retail investors are increasingly viewing sustained allocations as a challenge, which is testing their long-term conviction, he said.
Vaibhav Chugh, CEO, Abakkus Mutual Fund said, “The moderation in net inflows during May reflects a degree of geopolitical uncertainty and investor caution.”
He added that the outflows seen in fixed income categories are indicative of liquidity management and corporate treasury requirements, rather than weakening demand.
In the current environment where opportunities exist across market caps, it becomes increasingly important to rely on experienced investment managers for stock selection, he added.
After 13-month of positive inflows, Gold ETF registered net outflow of ₹725 crore (inflow of ₹3,040 crore) as investors preferred to book profit. The rise in import duty to 15 per cent pushed up domestic gold prices despite weak global trend. Silver outflow increased to ₹2,133 crore (outflow of ₹127 crore).
Nehal Meshram, Senior Analyst, Morningstar Investment Research India, said, “The reversal in gold ETF was driven by profit-booking and a shift in investor risk appetite leading to rotation away from safe-haven assets.”
The rising opportunity cost of holding gold, particularly in an environment of relatively attractive yields in fixed income, have also contributed to the pull-back, she adds.
SIF inflow was steady at ₹1,396 crore ( ₹1,219 crore) with AUM increasing 12 per cent to ₹13,814 crore ( ₹12,329 crore) in May.