Credit risk funds saw the highest drop of 11,800 folios in May.
The mutual fund industry opened 5.54 lakh new folios in May, taking the overall folio count to 8.32-lakh crore, despite payment defaults in the debt market.
The defaults did have an impact though. Investor accounts in credit risk funds and equity funds fell. But the increase in liquid funds propped up the overall numbers.
According to data on Association of Mutual Funds in India (AMFI), liquid funds that are used for companies to park surplus cash, added the highest 41,927 investor accounts in May, followed by ultra-short duration fund that added 15,404 folios last month.
Under the income/debt categories, credit risk funds saw the highest drop of 11,800 folios in May. Investors seem to have stayed off credit risk funds following numerous credit events, indicating a sharp decline in their risk appetite. This is also evident from the outflows registered in this category.
As per AMFI, outflows in credit risk funds increased significantly to Rs 4,156 crore as against Rs 1,253 crore in April. Credit-risk funds are debt funds that have at least 65 percent of investments in less than AA-rated paper.
Last 10 months have seen default by IL&FS group companies, rating downgrades of Dewan Housing Finance (DHFL) to 'default', a set of downgrades for multiple companies of Reliance ADAG Group and deadlock over the resolution of mutual funds’ exposure to Essel Group firms.
On the equity side, equity funds saw a drop of 16,000 investor accounts.
Fund managers attributed the fall in a number of investor accounts to volatility in the equity market as investors preferred to stay on the sidelines ahead of the election outcome on May 23.
Assets under management of the mutual fund industry stood at Rs 25.43 lakh crore at end of May, up 5 percent month-on-month, as per AMFI data.MFs received net fresh flows of nearly Rs 77,000 crore in May, mainly driven by stable inflows into liquid funds and modest equity figures.Subscribe to Moneycontrol Pro and gain access to curated markets data, exclusive trading recommendations, independent equity analysis, actionable investment ideas, nuanced takes on macro, corporate and policy actions, practical insights from market gurus and much more.