Heightened uncertainty in the stock market ahead of Lok Sabha elections later this year, poor returns from equities in the past year and year-end holidays saw flows into equity-oriented schemes of mutual funds in December slip to their lowest levels in 30 months.
Liquid funds, too, saw outflows of ₹1.49 lakh crore during the month as banks and NBFCs usually redeem assets in the last month of a quarter.
Flows into equity funds, mainly driven by retail investors, fell to ₹6,651 crore — their lowest level in 2018. In November, the flows were at ₹8,629 crore, while earlier in January 2018, they stood at ₹23,055 crore. The outflows led to the overall assets under management slip to ₹22.86 lakh crore in December from ₹24.03 lakh crore in the previous month.
But retail investors continued to invest into equities primarily through systematic investment plan (SIP), with collections through this method touching a new all-time high of ₹8,022 crore as compared to ₹7,985 crore in November 2018.
“Retail investors continued to demonstrate disciplined investment behaviour despite high volatility,” says N S Venkatesh, CEO, AMFI.
With elections scheduled in May this year, many investors are putting long-term investments on hold for the moment. The drop in performance of equity schemes in the wake of the sell-off in equities may also have discouraged investors against putting money into them.
“While investors are making investments through SIPs, for lump sums, they are adopting a wait-andwatch approach as they expect markets to be volatile in the run-up to the elections,” says Neil Parikh, CEO, PPFAS Mutual Fund .
Industry watchers also blame the lower inflows on the recent decision by markets regulator Sebi, which discouraged sales partners from pushing the prodcut.
Sebi banned upfront brokerage payments in mutual funds effective October 22. Foreign bank distributors that had worked on upfront payment of commissions are expected to rework their structures with fund houses and this is likely to be implemented from this month.
“A slowdown in the inflows was also expected on account of the year-end holidays where the distribution tends to wind down a bit. It picks up in the March quarter,” says Vishal Kapoor, CEO, IDFC Mutual Fund.
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