Mutual fund investors seek ‘balance’, cut back on equity bets in August

Flows into equity mutual funds dipped sharply in August compared to the previous month, as investors made fresh allocations to a new fund offer (NFO) of SBI Balanced Advantage Fund, which invests in a mix of equity and debt. Equity mutual funds saw inflows of ₹8,667 crore in August, sharply lower than the previous month’s collections of ₹22,584 crore. The advance in the equities saw the industry’s total assets under management in August surge to ₹36.09 lakh crore as against ₹35.15 lakh crore the previous month.

Investors continued to make investments through systematic investment plan (SIPs) with such collections touching ₹9,923 crore, ₹314 crore higher than the previous month.

“With economic growth picking up, investor confidence in equity as an asset class is back. People waiting for a correction are slowing coming back into the market,” says G Pradeepkumar, CEO, Union Mutual Fund.

Flows into equity schemes in July was ₹22,583 crore, nearly four times the inflows of ₹5,988 crore in June with NFOs contributing to nearly half of the flows during the month. Four equity NFOs raised around ₹13,709 crore in July. Out of this, the ICICI Prudential Mutual’s Flexicap fund launch alone mobilised ₹9,808 crore.

The balanced advantage fund category got the strongest inflows of ₹16,571 crore in August as against ₹2,266 crore in the previous month, largely on account of inflows of ₹14,500 crore in SBI Balanced Advantage Fund NFO.

Within the equity schemes, the flexicap category saw the highest flows at ₹4,741 crore, followed by focused equity schemes at ₹3,073 crore and thematic funds at ₹1,885 crore. Equity-linked savings schemes or ELSS funds saw outflows for the fifth consecutive month as investors booked profits after the mandatory three-year lock in and reallocated to other equity schemes. Index funds saw inflows of ₹1,934 crore, while international funds saw inflows of ₹312 crore.

In debt funds, liquid and overnight funds saw combined outflows of ₹12,500 crore during the month on account of continued low returns in the range of 3-3.5%. Floater and corporate bond funds saw inflows of ₹9,990 crore and ₹3,065 crore, respectively.

“Corporates seem to be losing faith in debt funds as inflows of only ₹1,074 crore were recorded this month. Liquid and overnight funds that were the major drivers of the debt category witnessed outflows, which can be attributed to the lower returns in these categories or the shift of long-term corporate money to arbitrage funds,” said Gautam Kalia, head – investment solutions, Sharekhan by BNP Paribas.