Thursday, July 9, 2020

Decline in equity investment during June 20

A net investment of Rs 240 crore was made during the month of June in equity schemes, which is the lowest monthly investment in the last four years. 

This is also when the stock markets are running and in June the indices gained about 7 percent. Interestingly, in June itself, gold exchange trade funds invested more (Rs 494 crore) than equity schemes. This shows that mutual fund investors are avoiding risk.

Industry experts speculate that the reason for the increase in withdrawals from equity schemes may also be the withdrawal of funds by institutional and individual investors.

Swaroop Mohanty, CEO of Mirae Asset Management Company, said, "Net investment has come down due to institutional investors redeeming investments and large amounts of investments from large-cap and multi-cap funds.

Equity schemes have also been affected by the move of safe investment by common investors amidst strong return after a sharp fall in the market. The market has climbed nearly 40 per cent from its March 23 low.

Multi-cap funds generated Rs 777 crore in June and net withdrawals of Rs 212 crore from large-cap funds. The month has been the worst since March 2016 in terms of equity investment. In March 2016, Rs 1,370 crore came out of equity schemes. Equity investment in June declined by 96 per cent compared to the average investment of Rs 7,103 crore in the previous 12 months.

 It has declined by 95 percent compared to May. In June, the Systematic Investment Plan (SIP) also saw 2.4% less investment than in May. According to NS Venkatesh, CEO of the Association of Mutual Funds in India, investors pulled out of the SIP due to dwindling cash flow due to the Kovid epidemic. The SIP installment check facility has also affected the data.

Interestingly, mid- and small-cap funds have shown positive inflows, but industry partners say that investment withdrawals in this category may pick up as many investors have been stuck in these categories for a long time.

Hybrid schemes saw a withdrawal of Rs 1,740 crore from balanced hybrid funds, while Rs 941 crore was withdrawn from Balanced Advantage Fund. Experts said further withdrawals from the balanced hybrid are possible.

Industry experts say that in recent months there has been a surge in public interest in investing directly in stocks, which is indicated by the number of new demat accounts in various broking houses.

Tax obligations on the debt front led to a net withdrawal of Rs 44,226 crore from liquid funds at the end of the quarter. There was a net investment of Rs 12,235 crore in short-term plans and Rs 8,323 crore in short-term plans.

Investments of Rs 10,737 crore in corporate bond funds and Rs 5,477 crore in banking and PSU funds were made in June. There is also a trend of withdrawing investment from credit risk funds. In June, Rs 1,493 crore was withdrawn from these funds.

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