SIP inflows into equity schemes continue unabated in September

Flows into equity mutual funds dropped 28 per cent in September to Rs 6,609 crore from the previous month on account a drop in lumpsum investments due to uncertainty about the market outlook.

Retail investors, however, continued with their systematic investment plans (SIP) in equity mutual funds in September, while various debt mutual fund categories — liquid and credit risk funds — witnessed outflows.

“News flow both locally and globally has been negative. Trade wars continue between the US and China while there is a slowdown in some segments, which is keeping away investors from making lumpsum investments,” said Neil Parikh, director, PPFAS Mutual Fund.

Investors have been worried about the economic slowdown and the crisis in the financial sector though some of the concerns over the downturn have been alleviated because of the corporate tax rate cuts.

Net inflows into equity funds were Rs 9,152 crore in August and Rs 8,112 crore in July. “Lumpsum flows are sensitive to short-term volatility. Also ahead of festive season, investors shied from making lumpsum investments,” says Alok Agarwala, head (research) Bajaj Capital.

Flows into equity schemes through SIPs touched Rs 8,263 crore in September compared to Rs 8,230 crore in August. This is the tenth consecutive month when monthly SIP collections have stayed above Rs 8,000 crore.

“Although SIP inflows have stabilised, disenchantment towards SIP in the past few months is being reflected both in terms of new SIP registrations as well as in the number of discontinuations,” said Rajan Jain, analyst at SBICap Securities. “We expect SIP gross inflows to consolidate in 2019 due to changes in TER (Total Expense Ratio) and almost in-line returns versus the benchmark indices.” TER is the total fees that funds charge investors.

Within equity mutual funds, investors made allocation across all categories of funds. About Rs 1,560 crore went into large cap funds, Rs 1,675 crore into multi cap funds, Rs 1,277 crore into mid cap funds and Rs 896 crore into small cap funds.

SIP inflows into equity plans continue unabated in September

Arbitrage funds, which invest in a mix of shares and stock futures, continued to see inflows of Rs 4,757 crore in September as rich investors opted for this category over debt funds. They have seen high inflows in the recent past as they enjoy better taxation as compared to debt funds. If withdrawn before a year, gains are taxed at 15 per cent in arbitrage funds, compared to 30 per cent for debt funds.

Hybrid funds such as balanced funds and equity savings funds saw outflows of Rs 1,930 crore and Rs 688 crore respectively.

The fixed income category saw outflows of Rs 1,58,033 crore in September. Liquid funds saw outflows of Rs 1.40 lakh crore in September as corporates withdrew money to pay advance tax and banks withdrew to meet capital adequacy norms, which is usual at the end of every quarter.

Credit risk funds, which invest in riskier debt securities, saw outflow of Rs 2,351 crore in September. This is the sixth month the category has seen outflows. Since April, credit risk funds have seen outflows of Rs 16,135 crore.

Investor appetite for riskier products in the fixed income category has waned because of the deterioration of financials of non-banking finance companies. Investors are ticking to high quality debt papers these days.

The Banking and PSU debt fund category — one of the most favoured categories in the fixed income space over the last one year — saw inflows of Rs 2,065 crore.