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Inflows in equity schemes near all-time highs

Higher inflows in the equity mutual fund schemes have continued unabated for the seventh month in a row this financial year.

With buoyed sentiments in the stock markets and key indices trading at newer highs, investors have poured a total of Rs 43,700 crore in the ongoing fiscal — the highest ever in the sector’s history — in a matter of less than three quarters.

According to Milind Barve, managing director of HDFC Mutual Fund, it is a clear signal of strong comeback by investors to equity as an asset class. “The industry is witnessing such inflows after a gap of 6-7 years. Investors are fast realising that they cannot afford to miss the segment,” he said.

In November, the sector has re-conquered its investors’ base of 30 million mark after falling to as low as 29.1 million in March this year.

With such a large inflows in equity category, the segment is only Rs 4,000 crore away from its peak inflows of Rs 47,000 crore during the year 2007-08. But the pace with which equity schemes have seen fresh flows of money in this year, it appears in December only the segment will surpass the earlier peaks of FY08. On an average, monthly net inflows in 2014-15 has been over Rs 5,000 crore.

The gross sales in equities (including equity-linked savings schemes of ELSS) stood at nearly Rs 11,000 crore in November.

The new fund offers (NFOs) have played an important role in garnering assets from investors. Close-ended equity schemes, in particular, have cornered nearly 80 per cent of the fresh inflows. For instance, so far, this year, 59 equity NFOs have been launched. Out of it, 38 are close-ended schemes. Further, the amount raised through NFOs stand at around Rs 9,650 crore. Close-ended equity launches contributed about Rs 7,300 crore.

According to Niranjan Risbood, director (fund research), Morningstar India: “The markets have improved and people are willing to put in fresh money. Since a majority of these funds are close-ended in nature, with much better commissions, distributors are also pushing these products. I see this continuing, as new launches are an easy way to get money in a rising market in India. There will be more such funds coming with lock-in periods.”

With higher commissions to distributors, sometimes as high as six to eight per cent, fund houses have managed to corner more of the new money into the closed products.

As on 30 November, mutual fund industry offered 394 equity related schemes managing an asset under management (AUM) of Rs 3.14 lakh crore.

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