Net Outflows From Income And Debt-Oriented Schemes Continues

According to a data released by Association of Mutual Funds in India (AMFI) on July 8, 2019, nate outflows from income and debt-oriented schemes continue. The net outflows from both these investment tools stood at Rs. 1,71,349.32 crore during June 2019, which led to an overall decline in the June-end AUM at Rs. 24,25,040.37 crore from Rs. 25,93,559.63 crore as on May 31, 2019. Post the IL&FS drama in September 2018, debt mutual funds have been in the news due to a lot of liquidity constraints along with severe defaults by some NBFCs. Some debt schemes, which saw outflows in June 2019 included overnight fund, liquid fund, low duration fund, money market fund and credit risk fund amongst others. Commenting on the liquid fund outflows NS Venkatesh, Chief Executive, AMFI, said, "This is a usual quarter-end phenomenon where the industry does witness temporary redemptions from liquid funds." 

The credit risk fund for June saw 35% lower outflow standing at Rs. 2,694.87 as compared to the May outflow, which stood at Rs. 4,155.79 crore. Whereas there has been an increase in the outflows of fixed maturity plans (FMPs) from Rs. 1,797.93 in May to Rs. 2,361.31 in June, which is an increase of 31%. FMPs are closed ended funds and hence investors can only get their funds back on maturity of these FMPs. 

Since FMPs are close-ended schemes, even if an investor wants to sell his FMP units before maturity, he can do so only through trading on the exchange. 

The overall AUM for June 2019, however, stood higher at Rs. 25,81,397.21 crore, as compared to Rs. 25,43,248.91 crore for May 2019 and Rs. 25,27,632.75 crore for April 2019. “On the fixed income side, although there has been outflows from liquid schemes, the flows into gilt schemes and long duration-schemes have stood positive, owing to RBI’s dovish stance on interest rates,” said Venkatesh. As per AMFI, when it comes to open-ended growth and equity-oriented schemes, there has been a consistent growth in last three months driven primarily by multi-cap and large cap fund categories. 

The Net Inflows in the equity-oriented schemes have grown three times faster in the last one month at Rs. 2,256.37 crore from May 2019 to June 2019, compared to the rise in the earlier month at Rs. 797 crore from April 2019 to May 2019. “Stellar jump in the inflows into equity schemes over the last two months, especially after the decisive electoral verdict has helped repose retail investor trust. Political Stability, lower inflation coupled with RBI stance to lower interest rates leading to possible robust growth in the corporate earnings is leading enhanced retail flows towards equity-oriented schemes,” commented Venkatesh. The Average Assets Under Management (AAUM) for June 2019 stood higher at Rs. 25,81,397.21 crore, as compared to Rs. 25,43,248.91 crore and Rs. 25,27,632.75 crore witnessed in May 2019 and April 2019. The SIPs for June 2019 stood at Rs. 8,122.13 crores coming from 2.73 crore SIP accounts noted AMFI.

While investors are worried about their debt fund investments, mutual funds experts opine that as long as a particular scheme in which investors have invested doesn’t have a significant allocation to any particular corporate group, overall scheme returns should not be impacted in a big way and diversification does help in reducing the credit risk.