Investors pumped in Rs 1.24 lakh crore into various mutual fund schemes in three months ended June 2020, with liquid and arbitrage segments contributing the most to the inflow. This follows an outflow of over Rs 94,200 crore into mutual fund (MF) products in the preceding three months, according to data with Association of Mutual Funds on India (Amfi).
The positive inflow pushed the asset base of 45-player mutual fund industry by over 14 per cent to Rs 25.5 lakh crore at June-end from Rs 22.26 lakh crore at the end of March. During the quarter under review, Rs 1.1 lakh crore came from debt funds, Rs 20,930 crore from arbitrage funds and Rs 11,730 crore from equity-oriented schemes.
Within the fixed income securities or debt funds, liquid schemes, where most of the institutional money is parked, witnessed inflows amounting to Rs 86,493 crore. The segment, with investments in cash assets such as treasury bills, certificates of deposit and commercial paper for the shorter horizon, had witnessed an outflow of Rs 94,180 crore in the March quarter, typically due to advance tax payment requirements.
In addition, banking and PSU category, which is considered as a safe option, received inflows of Rs 20,912 crore in the quarter ended June 2020, compared to a withdrawal of Rs 66 crore in the previous three months. As a mandate, such funds need to invest a minimum 80 per cent of their total assets in debt instruments of banks, public sector undertakings, or public financial institutions. This makes the category of investment relatively safer than some of the other fixed-income categories in terms of credit risk.
Further, investors poured in Rs 18,738 crore in corporate bonds. Market experts said investors continue to be cautious by staying away from riskier investments due to recent credit crisis that adversely impacted fixed-income markets. Accordingly, segments such as credit risk and medium duration, which also comprise of funds that take credit bets, witnessed net outflow.
Apart from debt funds, investors put in Rs Rs 20,930 crore in arbitrage funds. With lowered interest rates bank deposits are not an attractive option for investors and such low-risk investors are moving towards arbitrage funds as these funds are considerably liquid compared with other debt funds and on par with the equity schemes, they added.
Such funds invest a minimum of 65 per cent in equity and related schemes, around 20 per cent in debt instruments and the remaining in fixed deposits. Besides, equity schemes saw an inflow of Rs 11,710 crore during the period under review against an investment of Rs 30,703 crore in the March quarter.
In addition, gold exchange traded funds saw net inflows of Rs 2,040 crore in the June quarter, much higher than Rs 1,490 crore infused in the preceding three months. "As the surge in coronavirus cases have cast a doubt on the swift recovery hopes, investors continue to hedge their exposure to riskier assets by investing a portion of their assets in gold, as it is seen as a safe haven in times of uncertainty," said Himanshu Srivastava, senior research analyst (manager research), Morningstar Investment Adviser India.
Harsh Jain, co-founder and COO of Groww, said many investors are preferring to park their money in gold in light of the volatile markets. However, credit risk funds, which invest 65 per cent of the investment corpus in less than AA-rated paper, saw an outflow to the tune of Rs 25,905 crore.
Such funds had witnessed a pull out of Rs 19,239 crore in April, Rs 5,173 crore in May and Rs 1,494 crore in June. Huge outflow in April was mainly due to redemption pressure and lack of liquidity issues. Moreover, shutdown of six debt schemes by Franklin Templeton Mutual Fund added to the woes.