Equity funds record net inflow for three months in a row though the figure is drastically lower in October
Moneylife Digital Team
The equity mutual fund schemes have enjoyed net inflows for the third successive month but inflows have tapered off drastically. According to statistics available from industry body Association of Mutual Funds in India (AMFI), equity funds witnessed a net inflow of Rs210 crore during October. As compared to the last month, which saw equity inflows of Rs1,440 crore, October inflows registered a 85% drop. The entire addition came from existing schemes. There were no additions from new fund offers. This has taken the overall net inflows in FY11-12 to Rs2,820 crore against a net outflow of a massive Rs18, 424 crore during the same period last year.
This small positive inflow belies the mood prevailing among investors and the marketplace. The market is in a volatile mode (the Sensex had gained 10% in the previous month) and a lot of buying and selling of mutual funds happened even as investors looked to directions. This is reflected in the fact that while equity inflows were Rs3,734 crore during the month, there as a huge redemption of Rs3,524 crore leading to a net inflow of only Rs 210 crore.
The heartening aspect is that a lot of investment is happening through systematic investment plans even through a depressed market. Earlier, money used to flow in only in a rising market.
The breakup for various funds for October 2011, available from the Association of Mutual Funds of India, indicates that there was an inflow of Rs8,288 crore from income funds, balanced funds saw a net inflow of Rs12 crore, liquid/ money market funds had an inflow of Rs32,745 crore, gilt funds had an outflow of Rs252 crore, gold ETF funds received a net inflow of Rs455 crore, whereas other ETFs saw an outflow of Rs191 crore, and fund of funds investing overseas had an inflow of Rs20 crore. The aggregate for October 2011 for all categories of mutual funds has been a net inflow of Rs41,287 crore. The aggregate for equity funds for 2011-12 has been an inflow of Rs3,285 crore till now.
One of the reasons for the net equity inflows consecutively in the last two months may be because mutual fund houses are leaving no stone unturned to keep distributors in good humour. Asset Management Companies (AMCs) are paying a higher upfront fee to distribution subsidiaries of foreign and private banks nowadays to drive ‘exclusive sales’ of their schemes, mainly equity schemes. This commission is in addition to the upfront and annual trail fees that mutual funds pay distributors for selling their schemes.
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