Indian investors are clearly not spending now and the consumer surplus that they are having is going into savings, mainly bank deposits, Sundaram Mutual Fund MD and CEO Sunil Subramaniam said.
Speaking about the drop in flows into equity mutual funds, Subramaniam said, “If you desegregate the net sales number, and look at the gross sales separate from the redemptions, I think there has been a 5 percent drop in the gross inflows. However, there has been a 20 percent spike in the redemptions. So, what has led to the drop is redemptions.”
However, Subramaniam expects flows to return in the next few months. “The flows are a function of the overall flows into the financial services space. So, investor clearly is not spending today. The consumer surplus that investors are having is not going into spending, it is going into savings. Where is it going in savings? I think it is going into bank deposits because compared to inflation there is a huge real rate benefit. So, the main reason for this is that the money is going into the bank deposits,” he pointed out.
Over the next few months, as rate transmission happens on the lending side, the deposit rates are expected to get cut. "With the tax savings season also commencing from this month, I think you will see a healthy flow back into equities from now until March,” he added.
While new SIP flows have been coming in, the net number is hanging around Rs 8,000-8,200 crore. “However, I would expect this number to touch Rs 9,000 crore before the end of the financial year. So, I see this as a very temporary trend in terms of the numbers remaining stagnant. I think in the coming months you would see this trending up and I would say touching Rs 9,000 crore before March as a monthly inflow number, I would expect that to happen sooner,” he added.
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