Mutual Funds inflows hit 10-month low in August: Analysts highlight reasons

Several analysts believe that asset management companies (AMCs) which are also known as Mutual Fund firms have been booking profit on the back of improved markets lately. The Indian markets have reported growth on the return of foreign investors for the second straight month in August.

According to news agency PTI, inflows in equity Mutual Funds hit a 10-month low of Rs 6,120 crore in August. “This was the 18th straight month of inflows in equity mutual funds, but the pace of inflow has been declining over the past few months,” the PTI report said on Friday.

Manish Mehta, National Head and Sales, Marketing & Digital Business, Kotak Mahindra AMC said, “With an uptick in benchmark index, some investors would have booked profits to balance their asset allocation between equity and debt. Investors are also moving from sector funds into diversified equity and dynamic asset allocation funds.”

The net inflows in August were lower compared to Rs 8,898 crore in July, Rs 15,495 crore seen in June, Rs 18,529 crore in May and Rs 15,890 crore in April, according to data released by Association of Mutual Funds in India (Amfi) on Friday, the report pointed out.

While another analyst, Suman Bannerjee, CIO, Hedonova said, “The decline in inflow is because of the bond interest rates in the US are yielding higher and the NASDAQ is bouncing back, it makes sense to book profits in India where valuations are still high and invest at lower valuations back home in the US markets.”

Similarly, Omkeshwar Singh - Head RankMF at Samco Group said, “Markets have moved up quite sharply from recent lows, therefore many investors have started booking profits in equity schemes as the markets are near all-time high and some amounts have also gone form equity to short term debt funds due to rising interest rates.”

The investors have also become cautious at this level of markets and although the SIP flows have been robust, there is net outflow in lumpsum mode, the analyst at Samco Group added.

The lower flows would continue for a few more months despite falling crude oil prices, the rupee depreciation against dollar and uncertainty of global slowdown leading to some short of near-term challenges over the long term view, Prashanth Tapse, Sr VP Research, Mehta Equities said.

“Lower equity inflow can also be attributed to some kind of profit booking and redemption attempts amongst domestic investors from equity space and swift to debt mutual funds which saw better yielding curves in the current market scenario despite falling crude oil prices,” Tapse added.