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Last Updated : Feb 13, 2020 07:35 PM IST | Source: Moneycontrol.com

What Positive Mutual Fund Trends Indicate About Economy

There has been a definite curve on mutual fund trend in India.


With inflows into Indian equity funds climbing to a five-month high, and mutual fund houses witnessing an overall inflow of Rs 1.2 lakh crore in January against the outflow of Rs 61,810 crore in the previous month, fund managers are attributing the trend to positive movements in all categories of open-ended schemes and growing retail monthly Systematic Investment Plan (SIP).

Most of the analysts are optimistic on the market outlook, thanks to the Union Budget 2020 and the subsequent Reserve Bank of India (RBI) policy initiatives to bring in several structural changes. According to an industry expert, this positive growth momentum in mutual fund AUMs (assets under management) could well continue. Attributing it to the growth-oriented Budget and the central bank stance on continuous benign interest rate cycle, he opined that the move has resulted in 15 to 20 per cent growth for the mutual fund industry this fiscal.

The momentum in AUM was triggered by an increase in the AUM of income or debt oriented schemes, which saw a rise in their AUMs by 4.03 per cent on a sequential basis. Income and debt oriented schemes form 45 per cent of the total domestic AUMs. Within the debt or income category, the liquid category saw the highest inflow of Rs 59,682 crore against an outflow of around Rs 71,158 crore during December 2019. 

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The pure equity-oriented schemes that come to around 28 per cent of the total mutual fund assets grew by 3.24 on a monthly basis. Better performance by equity market has helped to attract net inflow of Rs 7,877 crore, which is the highest in the last three months. The asset base increased to Rs 7.87 lakh crore in the month of January 2020 from Rs 7.62 lakh crore in the month of December 2019. Multi-cap and mid-cap fund saw the highest inflow to the tune of Rs 1,722 crore and Rs 1,798 crore respectively. 

According to the Association of Mutual Funds in India (AMFI), equity mutual funds took in Rs 7,800 crore last month, which is highest since August, amid signs of revival in the country's small and mid-cap stocks. The mid-cap stocks have turned a corner this year after back-to-back annual declines sparked by investor preference for larger companies amid a slowing economy. Research analysts are terming it as initial signs of investor sentiment, turning positive for the broader market. They expect that if the trend continues for another 3-6 months, the markets will see strong inflows in this segment.

Meanwhile, AMFI data shows collections through SIPs have stayed above the Rs 8,000-crore mark for the past 14 months. Last month, it touched another all-time high of Rs 8,532 crore, in an indication that investors have accepted SIP as a tool to enable long-term wealth creation. Investors who register for a SIP put in a fixed amount every month at a fixed date, irrespective of where the equity indices are and how they are performing.

With the retail investors continuing to invest in the markets through SIPs amid positive growth momentum in mutual fund AUMs, analysts are expecting better days ahead for the Mutual Fund market as a whole.

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First Published on Feb 13, 2020 07:35 pm
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