Mutual fund industry witnessed massive outflows of INR 1,57,102 crore in June, unlike inflows of INR 76,619 crore in open-ended schemes in the last month, largely due to INR 1,52,432 crore outflows in liquid funds. However equity funds including ELSS, saw inflows of INR 7,663 crore, growing 42% over May inflow of INR 5,408 crore.
Industry’s overall assets under management (AUM) dipped by 6.5% in June compared to the last month end and now stand at INR 24.25 lakh crore. Category-wise net inflows/(outflows) is shown below:
Among open-ended equity categories including ELSS (Tax-Saver), June saw higher inflows compared to April-May, although the SIP inflows have remained stable above INR 8,100 crore. Industry veterans attributed this to political stability and hopes of earnings growth. Unlike in May, where Mid and Small cap categories saw maximum inflows, Multi cap and Large cap categories saw highest inflows in June. This was largely due to investors playing safe ahead of the Union Budget. Stable SIP inflows at INR 8,122 crore in June show maturity of Indian retail investors.
Passive investing seems to be gaining popularity among investors. “Other ETFs” category which majorly contains equity oriented funds along with index funds saw inflows of INR 5,574 crore in the month of June, which is more than double compared to the last month. Also contributions by EPFO and other exempted PF trusts which can invest up to 15% of their yearly incremental flows into equity ETFs led to these inflows.
Hybrid funds, particularly the balanced/aggressive hybrid category continued to lose its sheen among retail investors. This category witnessed an outflow of INR 1,910 crore in June, marginally lower than April-May. However within the Hybrid category, Arbitrage funds continued to see large inflows to the tune of INR 3,166 crore in June vs INR 4,554 crore in May.
On the other hand, Liquid funds along with other debt categories like Overnight, Money Market, Ultra Short and Low Duration witnessed steep outflows on the back of corporates redeeming their investments to meet their quarter end accounting and payment needs like paying advance tax. Also, banks withdrew money from these funds to meet their quarterly capital adequacy norms.
Credit risk and Medium term debt categories also continued to see huge outflows for the third month in a row due to the risk aversion of retail investors. In the past few months, numerous debt downgrades rocked the debt markets hurting retail investor sentiments and hence investors are preferring safer categories like Banking & PSU debt funds. Additionally, RBI’s rate cut in June and an accommodative stance has led to inflows in gilt and long duration space as interest rate cuts may lead to better returns in duration products.
It is not advisable to take investment decisions based on inflows/outflows as these can be volatile. Your investment decisions should be based on your investment objective, investment horizon and risk profile. Consider investing for long term through SIP as it ensures rupee cost averaging.
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