Equity mutual fund inflows in October have risen 31 percent to Rs 14,783 crore against Rs 11,251 crore in September. In fact, contrary to expectations of a contraction, the October flows have come in at a seven-month high. This includes Rs 11,422 crore in pure equity funds, Rs 2,161 crore in Arbitrage Funds and Rs 1,200 crore into ELSS (equity linked saving scheme ) funds.
Inflows into balanced funds have slowed down by nearly 30 percent in October, coming in at a measly Rs 519 crore. This is a significant decline from the Rs 2,400 crore last month. Equity ETFs (exchange-traded fund) seem to be maintaining a steady pace with inflows rising 17 percent to Rs 2,820 crore in October.
The best bit of good news though seems to have come in from the liquid funds category which has seen an inflow of Rs 55,296 crore compared to an outflow of over Rs 2 lakh crore last month.
Some indication was given by HDFC AMC's Milind Barve in their conference call post Q2 results that their liquid fund had seen an inflow of Rs 75,000-80,000 crore. Kotak MF's Lakshmi Iyer also told that they have positive inflows into their liquid funds this month.
Income funds though have seen an outflow of Rs 37,642 crore and this is along expected lines.
SIP (systematic investment plan) inflows of Rs 7,900 crore are the highest this fiscal. In September end, there was a fear that retail investors would react to the crisis in non-banking finance companies (NBFC) by redeeming a whole hog their mutual fund investments.
There is some amount of stoppage, but new SIPs are compensating for it, Nilesh Shah of Kotak MF told CNBC-TV18, adding that SIP figure in November could be still better.
Swarup Mohanty, CEO of Mirae AMC, said they are seeing a dramatic shift in investor behaviour. While SIP numbers are still way off their peak, the pick-up is encouraging. Urging investors to keep the faith, Mohanty added that volatility is the best friend of the retail investor.
There has been some aggressive selling of mutual funds in the second half of October, partly ahead of the change in the upfronting of distributor commissions and partly on account of meeting targets which became even more stringent in the aftermath of the loss of confidence post the IL&FS mess, industry sources told CNBC-TV18.
But the fact is distributors can only sell to a ready buyer and so, it is the retail investor who should be congratulated for keeping the faith. Despite questions being raised on the credit quality of debt funds, investors have not redeemed from their equity funds and that itself remains an encouraging sign of the maturing retail investor.