Sunil Subramaniam on SIP inflows, AUMs at 15-month low and more

How do the inflows and outflows in the month of March look like?

This time the distortion was because of the Finance Bill which got passed where the government suddenly removed the taxation benefit for debt mutual funds from April 1. So, obviously from 27th to 31st March, the industry saw massive inflows, an estimated Rs 40,000- 50,000 crore flowing into debt mutual funds of medium term duration, like target maturity funds, corporate bond funds, banking and public sector debt funds because that was the last opportunity to take the indexation benefit.

Some of that money came from the short-term liquid funds where people were parking funds; some money switched from equity funds into the debt schemes and some came from the savings accounts of banks where they give last minute cheques and balance transfers on the 31st of March. The debt MF category would probably see a sharp spike upwards and that is what the data should show.

Other than that, the SIP book should continue to be strong. I do not think that is an issue. Another aspect here is that from April onwards, we do expect the hybrid funds to get interested because they are the substitutes for debt because they carry taxation, either an equity taxation or the indexation taxation depending on when. We are in a time when this transition is happening. So March should show a spike in debt, long-term, medium-term debt inflows.

You are expecting SIP inflow numbers to sustain. We have seen month after month that the number is now staying above that 13,000 mark. Do you expect it to continue to stay that high, given that we have seen a lot of churning, with a lot of regulatory moves coming in this particular domain?
I do not see that as a challenge to the SIP. In fact, because of the volatility in the markets, most of the advisors and distributors are actually pushing their customers not only to start long-term SIPs but even if they want to put a lump sum, There is a trend to say, spread your instalments over the next 6-12 months. STPs or systematic transfer plans from liquid schemes into equity also will be the preferred mode for people.

In volatile times, if you spread your risk, then the ‘buy low, sell high’ concept comes in, rupee cost averaging comes to its full play. So I expect the SIP numbers and STP numbers to remain strong this month and in the months to come.When you look at the total asset under management (AUM), this is the first time that the level is below what it was in November 2022. We are currently at Rs 40 lakh crore approximately, and in 2022, it was Rs 40.5 lakh crore. How should we be viewing that then?
I think there are two things here; one is that the markets have been flat. They have not moved. Second, if you take away SIP inflows, the industry has been seeing redemptions because people have been booking profits for their investments over the past years. So if you take away SIP flows, gross lump sum flows minus redemption, it would generally be a negative number. That is what has made the assets under management come down.

Thirdly, we are seeing the corporate capex cycle revive. So corporates which had parked their surpluses because they did not have any capex plan in earlier years in liquid and short-term debt have been drawing down because we are seeing that private corporate capex is getting a big lift.

People are liquidating their cash investments and making orders for their capital equipment. Before they go for bank financing, they would rather put their equity in. It’s a combination of these factors which has seen that net outflows have been there from the industry. The markets have not gone anywhere over the last one year. You will see that this is a slight correction. As you mentioned, assets under management are at a 15-month low.