India’s love-affair with mutual funds continues — for now.
Net inflows into domestic equity mutual funds grew 33% over August to Rs. 11,172 crore in September, data from the Association of Mutual Funds in India shows. The total amount collected through SIPs also increased marginally to Rs. 7,727 crore in September, up from Rs. 7,658 crore in August.
These numbers will bring some relief to the markets, which have been dreading how the volatility the markets saw in September would impact mutual fund investments. In September, India’s stock markets had one of their worst-ever months, with the Nifty falling from 11,751 levels to 10,930 levels, a 7% fall during the period. Experts had warned that if retail investors pulled their money out from mutual funds, or started discontinuing their SIPs, the fall in the markets could be exacerbated.
That doesn’t seem to have happened thus far, but not all news is good on the mutual funds front. Liquid or money market funds, which are short-term debt schemes where investors often park their idle money, saw net outflows of Rs. 2.11 lakh crore in September, compared to inflows of Rs. 1.71 lakh crore in August. Short term debt scheme investors were perhaps spooked by the default of ILFS on its bond payments, and chose to park their money elsewhere. The steep decline in short term debt schemes saw the total AUMs (assets under management) of the industry fall to Rs 22.04 lakh crore compared to Rs 25.2 lakh crore in August.
Mutual funds have been aggressively promoted as investment instruments over the last year, with television, print and radio campaigns earnestly telling people that Mutual funds sahi hain. Mutual funds have also become easier to invest into — Paytm launched is own mutual funds product, Paytm Money, last month, and offered direct plans with no monthly charges. Zerodha, another player in the mutual funds space, has also cut its monthly investing fee from Rs. 50 to zero in order to compete.
While these overtures have brought thousands of new investors into the mutual funds fold, there are also concerns over how resilient the mutual fund inflows into equities will be. As ads continually tell you, mutual fund investments are subject to market risks, and these investors have seen plenty of risks in their first few months investing with mutual funds. With the Nifty down 7% over the last month, and even more since, it remains to be seen whether these new mutual fund investors will stay on after the drops in the values of the mutual funds. But as far as September data goes, they seem to be holding on for the moment.