September is here to remind us that we have completed 8-months of the calendar year 2019 and reflect to review the past performance. It’s time to take a closer look at past month’s AMFI data which was shared recently to understand the Mutual fund industry’s progress so far.
As per the data released, there has been a rise in a number of folios. The number of open-ended equity folios have risen to 59.8 million (5.9 crores) in August 2019 from 59.4 million (5.8 crore) in April 2019, to push the overall count of a number of folios to 85.3 million (8.53 crore).
Table 1: Monthly rise in No of folios
|Total no of folios||8.27||8.32||8.37||8.48||8.53|
|no of debt folios||52||52||53||54||52|
|no of equity folios||580||584||588||594||598|
Net equity inflow for equity funds has surged by 12.3% on a month-on-month basis and by 9% on a yearly basis. It indicates that despite the markets going through the choppy waters, investors have not stopped adding equity into their portfolio.
Graph 1: Net Equity Inflow (Rs in crore)
Within the equity segment, the steep rise in the number of folios is attributed to a large part of inflows into large-cap funds, multi-cap, mid-cap, and small-cap funds with an inflow of Rs 2582.97 crore, Rs 1,581 crore, 1,068 crore, and Rs 1,307 crore, respectively. There has been a growth of 57% over last month’s inflows in small cap funds to increase the overall count of open-ended equity inflows to Rs 9152 crore (as seen in the graph below).
Graph 2: Net inflow of open-ended equity (Rs in crore)
Note: RHS includes overall open-ended equity inflow
The investors are unperturbed when it comes to investing in equities even in economic slowdown now which shows the change in investment preference from the old form of investing. The ‘Mutual fund sahi hai’ campaign has managed to increase the awareness among the masses. This has encouraged them to invest in various equity mutual funds diligently via systematic investment plans.
Graph 3: SIP Inflows (Rs in crore)
In the graph above, from the SIP inflows that dropped marginally but still at elevated levels, it is evident that investors want to reap the benefit of rupee-cost averaging to reduce market volatility coupled with the power of compounding to grow wealth over the long term.
Even the debt funds saw good growth in the number of folios, with the maximum investments in Liquid funds, Ultra-short duration funds, money market funds, Corporate Bond Funds, Banking and PSU funds, and Overnight funds.
Despite the debt crisis leading to credit crisis and losses experienced in the debt fund portfolios of investors. The below table shows a surge in the number of folios across various categories of debt funds for the month of August when compared over 5 months, 3 months, and 1 month.
Table 2: Number of open-ended debt folios and growth over past few months
|Open-ended Debt Schemes||Aug-19||5-month growth||3-month growth||1-month growth|
|Ultra-Short Duration Fund||638,945||8%||4%||2%|
|Low Duration Fund||915,412||-1%||-1%||0%|
|Money Market Fund||310,190||9%||6%||3%|
|Short Duration Fund||284,565||8%||5%||3%|
|Medium Duration Fund||227,175||-7%||-2%||0%|
|Medium to Long Duration Fund||107,611||4%||3%||2%|
|Long Duration Fund||24,038||29%||22%||8%|
|Dynamic Bond Fund||213,482||0%||2%||1%|
|Corporate Bond Fund||250,280||29%||19%||11%|
|Credit Risk Fund||534,794||-7%||-3%||-1%|
|Banking and PSU Fund||106,041||25%||16%||8%|
|Gilt Fund with 10 yr constant duration||23,013||121%||58%||21%|
And in terms of outflows/inflows credit risk funds saw heavy outflow of Rs -2,269.64 crore and the least amount of outflow was seen for Medium to Long Duration Funds.
Table 3: Net Inflow (+ve)/ Outflow (-ve) over past few months (Rs in crore)
|Open ended debt Schemes||Apr-19||May-19||Jun-19||Jul-19||Aug-19|
|Ultra-Short Duration Fund||11037||1191||-1926||601||2829|
|Low Duration Fund||4913||-2353||-4689||-223||794|
|Money Market Fund||6419||3896||-3832||5063||3765|
|Short Duration Fund||2771||-1316||-607||586||994|
|Medium Duration Fund||-531||-2063||-1159||937||-561|
|Medium to Long Duration Fund||264||387||-156||-60||-28|
|Long Duration Fund||8||90||22||59||11|
|Dynamic Bond Fund||412||-651||-786||-122||-67|
|Corporate Bond Fund||3874||1430||-131||2573||3578|
|Credit Risk Fund||-1253||-4156||-2695||-3411||-2270|
|Banking and PSU Fund||2792||3382||799||5914||2769|
|Gilt Fund with 10 yr constant duration||33||-61||45||80||40|
As per reporting by the Livemint, Mr N.S. Venkatesh, chief executive, AMFI said, “Mutual fund inflow is critical to maintain buoyancy in the stock markets with foreign institutional investors (FIIs) continuously selling Indian shares due to a host of reasons ranging from macro headwinds to taxation woes. In August, FIIs dumped $2.20 billion of Indian shares in the worst sell-off in 10 months, while domestic institutional investors (DIIs), including mutual funds and insurance companies, pumped in Rs20,933.59 crore.
The National Stock Exchange’s India VIX index, or fear index, which tracks investors’ perceptions of volatility, rose nearly 20% in August. Elevated levels of VIX indicate that investors are expecting correction at least over the next month.
However, will continue to witness robust flows and, on the debt side, liquid funds may see volatility owing to quarter-end phenomenon.”
In conclusion, PersonalFN is of the view that investors are becoming smarter and wiser in terms of the investment decisions for their long-term benefit.
But when the markets are volatile, going gung-ho and investing heavily in extremely risky equity funds can be hazardous for the investors’ portfolios.
One should aim to create a diversified robust portfolio based on Core and Satellite approach of investing that will mitigate the market undercurrents.
However, remember to have a clear investment objective in mind, know your financial goals, risk profile, and the time horizon you have for each financial goals before you invest your hard-earned money. Accordingly, you need to invest based on your personalised asset allocation and choose the fund based on the qualitative and quantitative parameters.
Prudent investing and financial discipline are vital measures to take for your long-term financial well-being.
This article first appeared on PersonalFN here.