The volatility in the Indian equity markets has led to a slowdown in mobilisation by equity funds, with inflows trending downward in the past few months as lump-sum investors have stayed away due to lofty valuations.
According to data from the Association of Mutual Funds in India (Amfi), equity funds mobilised Rs 28,671.39 crore in October, against Rs 36,656.66 crore in September. In the current financial year, equity funds have mobilised over Rs 30,817 crore per month on average.
Between July and September, mobilisation rose above Rs 30,000 crore each month as investors favoured the new fund offer (NFO) route— inflows touched Rs 42,100 crore in July, the highest so far this year, as equity NFOs collected Rs 13,709 crore.
“Investors have been investing only through NFOs in the last few months. The industry has been aggressive in pushing NFOs and I believe this will be a big worry if there is a sharp correction in Indian equities,” said a senior industry official.
Since July, fund houses have raised over Rs 27,151 crore through NFOs in equity funds alone. The amount increases to Rs 57,000 crore in the last four months if NFOs of all categories of schemes are considered.
“In the last few months, we have been advising investors to avoid putting lump sums, given the significant rally across sectors and broader markets. Investors are advised to not get swayed by ongoing volatility and resort to a strategy of accumulation,” said ICICI Direct Research in a note.
Over the past month, returns from the Sensex have decreased by 3.33 per cent, while in the last week it was 2.02 per cent. The slowdown in gross inflows for equity funds also impacted net inflows in October. Equity funds saw net inflows of Rs 5,214 crore in October, as against Rs 8,677 crore in September.
However, inflows through the systematic investment plan (SIP) route is a source of comfort for the industry, totalling Rs 66,973 crore so far this year, after rising above Rs 10,000 crore in September and October.
Jimmy Patel, MD and CEO of Quantum AMC, says: “The SIP book remains very strong even as lump-sum investors have stayed on the side-lines due to high valuations. Having said that, we believe we might continue to see higher inflows into equity schemes.”