Mid & Smallcap funds see revival of investor interest
Equity funds saw inflows of Rs 5,407 crore, higher than the Rs 4,609 crore in April.
About half of the equity inflows of Rs 2,689 came into mid- and small-cap schemes. “After the sharp correction in the segment over the past one year, many investors believe there is greater value in mid- and small-cap stocks,” said G Pradeep Kumar, chief executive officer, Union Mutual Fund.
“With inflation under control and earnings expected to improve, retail investors will stagger their investments into equities over the next one year, using systematic transfer plans,” said Pradeep Kumar.
Investors continued to show their faith in systematic investment plans (SIP) with collections at Rs 8,183 crore, marginally lower than April’s Rs 8,237 crore. Typically, 90 per cent of these inflows go into equity-oriented mutual fund schemes.
On the debt side, corporates, which seek safety, invested Rs 68,582 crore primarily in liquid funds. With uncertainty in the debt market, especially after the IL&FS crisis, risk-averse investors moved out of credit risk funds and pulled out Rs 4,155 crore from this category in May.
On the other hand, the banking and PSU debt fund category saw net inflows of Rs 3,381 crore. This category of funds invests mostly in bank certificates of deposits or bonds/debentures of public sector companies with most investing in AAA rated companies.
“The recent negative news flow regarding some fixed income securities in the debt market is impacting flows as credit risk funds and medium duration funds have seen increasing outflows, while banking and PSU funds are seeing increasing inflows due to rush to quality,” said Gautam Kalia, head - investment solutions at Sharekhan by BNP Paribas.
Among the hybrid funds, balanced funds saw outflows of Rs 2,481 crore as investors continue to withdraw money after dividends on such schemes are taxed.
With elections over and a stable government at the Centre, the focus is now on the Union Budget. With interest rates coming down, distributors believe equity will continue to be a favoured asset class with retail participation into such schemes.
“Retail fund flows would now further strengthen on the back of political stability, promise of further economic reforms and better macro-economic environment with healthy corporate earnings growth,” said NS Venkatesh, chief executive, AMFI.