SIP inflows marginally lower in May. Are mutual fund investors wary of committing fresh money?
SIP inflows are not growing at the same pace as it used to a few months ago before the IL&FS fiasco hit the debt mutual fund space.
Mutual funds collected Rs 8,183 crore via systematic investment plan (SIP) in May, shows data from Amfi. The collection is marginally lower by 0.67 per cent over April. SIP average inflows have been around Rs 200 crore per month from January to August 2018. However, the average additions per month slowed down to around 63 crore after that. (See chart below for more details).
“Continued retail investor confidence through SIPs has now set a new normal with monthly flows consistently crossing over Rs 8,000 crore. The numbers have fallen marginally over last month. But, if you compare the figures to same month last year, there is a healthy growth of 12 per cent. The retail fund flows would now hereon, further strengthen on the back of political stability, promise of further economic reforms and improving macro-economic environment coupled with healthy corporate earnings growth,” said N.S. Venkatesh, Chief Executive, Amfi.
Mutual fund managers say the marginal fall could be because investors are taking some time to renew their SIPs given the turmoil created by downgrades and defaults in the NBFC sector.
“The money that comes through SIP is very structural. There could be some moderation here and there but the overall trend is strong and we expect it to continue. If some SIPs matured in terms of instalments, may be investors did not really want to continue immediately without knowing the action outcome and we believe some of the big events are behind them. The numbers will gradually pick up,” said Harsha Upadhyaya, CIO-Equity & Sr. EVP, Kotak AMC.
Mutual fund advisors have been claiming that the recent spate of defaults and downgrades that have rocked the debt mutual fund space has impacted the investor confidence in a big way. Even some equity mutual fund investors have become cautious about their investments as they want to preserve their investment value. It all started with IL&FS which defaulted on inter-corporate deposits and CPs worth Rs 450 crore in June 2018. Next, the Essel Group, Yes Bank and DHFL followed suit. Overnight downgrades further eroded investor confidence.
According to Amfi data, equity mutual funds have seen a 17 per cent growth in their monthly net inflows from Rs 4,609 crore in April to Rs 5,408 crore in May on account of inflows into mid cap and small cap funds. Mid cap funds saw net inflows to the tune of Rs 1,273 crore and small cap funds saw net inflows worth Rs 1,416 crore in May.
“Essentially the valuation of mid cap and small cap stocks corrected so much in last year and with the new government coming in and with their economic reforms which are expected to be rolled out shortly will help the industry to grow. I believe investors are now reassessing that it is right time to re-enter the mid cap and small cap space and they are using the mutual fund vehicle to enter the mid and small cap space,” said Venkatesh.