Equity Fund Inflows Decline by Nearly 50% in June

Equity mutual funds in India saw an inflow of Rs 5,988 crore in June 2021. However, the overall inflows declined by nearly half from Rs 10,082 crore in May 2021. Mid-cap funds continue to perform well, with inflows of Rs 1,729 crore for June. You have equity-linked savings schemes or ELSS having outflows of Rs 791 crore and value funds of Rs 114 crore for June 2021. However, according to AMFI data, the mutual fund industry attracts investments, with unique investors doubling to 2.39 crore in the last four years. 

New investors enter mutual funds through SIPs

Many investors enter mutual funds through the systematic investment plan or SIP route as it encourages disciplined investing. It is a facility offered by mutual fund houses where you invest small amounts regularly in mutual funds. 

You may invest in equity funds through the systematic investment plan. It helps you buy units of the mutual fund across stock market levels and average out the purchase price of units over time. You have a sharp rise in new SIP investors with a record 21.3 lakh new SIP registrations for June 2021. 

The Assets Under Management (AUM) of SIPs are at an all-time high, accounting for 15% of the AUM of the mutual fund industry. Moreover, the number of SIP accounts have hit the four crore mark for the first time. 

Many investors want to put money in equity funds for the long term to achieve financial goals. You may invest in equity funds through the SIP instead of a lump sum amount to avoid timing the stock market. However, you must continue with SIPs irrespective of market fluctuations if you want to achieve your financial goals. 

Inflows into small-cap funds

Small-cap funds are a class of equity funds that invest mainly in companies with a market capitalisation below Rs 5,000 crore. It is suitable for aggressive investors who understand small-sized companies and know when to exit the investment. 

However, small-cap funds faced a decline in net inflows for June at Rs 705 crore compared to Rs 1,080 crore in May 2021. 

Small-cap funds have performed exceptionally well in the past year. Moreover, many small-cap funds have delivered over 100% returns in only one year. You have many investors booking profits in small-cap funds due to the immense gain in a short time. 

Inflows into debt mutual fund schemes

You have many investors putting money in floater funds in June 2021. It is a debt fund that invests predominantly in floating-rate bonds. You have floating-rate bonds offering interest rates in line with those in the economy. Moreover, floating-rate bonds periodically reset interest rates to keep them in sync with the economy. 

You have floater funds seeing inflows of Rs 6,318 crore in June 2021. It is because of the uncertain interest rate scenario in the economy. Moreover, several financial advisers have advised investors to invest in floater funds even as liquid funds and overnight funds offer lower returns. 

However, banking and PSU funds and low duration funds saw huge inflows in June 2021 of Rs 1,357 crore and Rs 6,273 crore, respectively. 

Inflows into hybrid mutual fund schemes

You have many investors exiting aggressive hybrid funds and balanced hybrid funds in June 2021. However, investors put money in balanced advantage funds and arbitrage funds.

You have net inflows of Rs 2,056 crore in dynamic asset allocation funds and Rs 9,059 crore in arbitrage funds for June 2021. 

You have investors putting money in preferred equity, debt and hybrid funds in June 2021. Moreover, SIPs have seen record inflows in recent years as they breach the four crore mark. In a nutshell, you have many first-timers investing in mutual funds through SIP to achieve their financial goals. 

For any clarifications/feedback on the topic, don’t hesitate to get in touch with the writer at cleyon.dsouza@cleartax.in