Net inflows in equity mutual funds rise in August but inflows from SIPs fall

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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Mutual funds’ asset base increased to Rs 25.47 lakh crore in August, a rise of 4 percent as compared with the preceding month, on the back of robust inflows in equity and liquid schemes.

However, inflows in mutual funds (MFs) through SIPs in August stood at Rs 8,231 crore, a slight fall as compared with Rs 8,324 crore a month ago.

The 44-player industry logged assets under management (AUM) of Rs 24.53 lakh crore in July-end, according to data from the Association of Mutual Funds in India (Amfi).

Mutual fund houses witnessed an overall inflow of Rs 1.02 lakh crore last month, much higher than Rs 87,000 crore seen in July. Of these, liquid funds alone witnessed an impressive over Rs 79,000 crore in August.

Fund managers attributed the growth in asset base to higher retail participation and robust inflows in equity schemes and liquid funds.

Open-ended equity schemes witnessed an infusion of Rs 9,152 crore, while there was a small outflow of Rs 62 crore in close-ended equity plans, taking total equity inflows to Rs 9,090 crore last month. In July, net inflow in such schemes stood at Rs 8,092 crore.

Among debt-oriented schemes, liquid funds saw an infusion of Rs 79,428 crore in last month as compared to Rs 45,441 crore, in July.

Besides, gold exchange-traded funds saw a total inflow of Rs 145 crore against an outflow of Rs 17.66 crore.

“Retail investor interest in equity mutual funds, for the fourth time in succession, continues to be steady, displaying maturity, despite uncertain economic and volatile market situation.

“Net inflows, largely in all categories of equity funds, especially in small and mid-cap funds, as also in the ELSS (equity-linked saving scheme) segment, signify heightened confidence and interest in emerging businesses and disciplined tax planning,” AMFI Chief Executive Officer N S Venkatesh said.

Speaking on the outlook for September, Venkatesh said that on the equity side, SIPs (systematic investment plans) would witness robust flows and on debt side, liquid funds may see volatility owing to quarter-end phenomenon.

The MF industry added 4.81 lakh folios — numbers designated to individual investor accounts, though an investor can have multiple accounts — last month to a total of 8.53 crore.

MFs are investment vehicles made up of a pool of funds collected from a large number of investors.

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Expect SIP flows to touch Rs 9,000 crore once market revives, says NS Venkatesh of AMFI

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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Inflows into equity mutual funds in August saw a growth of over 12 percent compared to July.

Total inflows crossed the Rs 9,000 crore mark with largecap and smallcap funds garnering most of the money. But, midcap funds saw a contraction of over 20 percent. Yash Jain spoke to NS Venkatesh, the CEO of the Association of Mutual Funds in India (AMFI) to find out more about the latest data.

Venkatesh said, “The total inflows is around Rs 1,02,000 crore. Out of that Rs 79,000 crore is coming from the liquid funds. Having said that I would say that essentially the equity schemes have all got good inflows. So, compared to July, the August numbers look better. So, that shows some sort of renewed interest coming into the equity side and investment is happening and it is distributed across largecap, midcap, smallcap etc.”

He further added, “SIP flows are at around Rs 8,200 crore. However compared to July it is little bit less – around Rs 96 crore less. However it shows that there is a stability – above Rs 8,200 crore over the last 6-7 it has been showing that stability. It has not plateaued but it has shown good signs of resilience despite the market conditions to stay above Rs 8,200 crore. So, once the market starts showing signs of revival and moving up, the SIP flows will start touching Rs 9,000 crore and beyond Rs 9,000 crore as well.”

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Swarup Mohanty of Mirae Asset Global Investments upbeat over August equity mutual fund inflow of Rs 9000 crore

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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Mutual fund data released for the month of August by Association of Mutual Funds in India (Amfi) shows that equity inflows have seen a 12 percent uptick compared to the previous month. The reading has crossed Rs 9,090 crore for the first time after March 2019.

CNBC-TV18 spoke to Swarup Mohanty, CEO of Mirae Asset Global Investments, and Vishal Kapoor, CEO of IDFC AMC, to decode the data.

According to Mohanty, the inflows in August were quite consistent. “We did see a slight improvement over the previous month. But Rs 1,000 crore above the previous month is a very good figure. It is spread across multi-cap and large cap. I think the multi-cap is making a very strong comeback and the mid-caps are holding steady. So, good to see asset allocation across categories,” he noted.

Commenting on SIP data, Kapoor said, “The SIP number that I have is Rs 8,230 crore which is broadly in line with what we have been seeing over the last few months. So, that is a very strong number. Also the equity flows are very heartening to see, a smart pickup over the last 2 or 3 months. In fact, since April we have had steady pickup in net sales. This month again we have seen a broad-based increase across large, multi-cap and smallcaps, so it is not just concentrated in one segment, it is quite broad.”

“Liquid funds are highly liquidity-led and September is not the best month to judge them. Also, the net sale number may not be symptomatic of what has really happened in the month. So, the average assets in the months may be a better way to look at liquid fund category and at least the data that I have seen so far seems to suggests that the category itself was positive but not to the extent of Rs 79,000 crore because that is a point-to-point number and this is really a daily moving category. So, it is up but not to that level,” Kapoor added.

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All that you need to know about Mutual Funds last week

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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The share of gross household financial assets doubled from 3 percent to 6 percent between 2014 and 2018, as per data from Association of Mutual Fund of India (AMFI).

AMFI-CRISIL factbook gives a picture of the changes in the mutual fund’s industry since 2014:

• Share of equity funds in total assets under management went up from 24 percent to 45 percent.
• The AUM of equity funds grew at a CAGR of 38.6 percent. This includes both inflows and returns.
• The AUM of Hybrid funds grew at 54 percent CAGR, liquid funds at 27 percent and debt funds at 8 percent.
• Individual investors upped their share of AUM from 48 percent to 58 percent in this period.
• The average ticket size for individual investors increased from Rs 1.02 lakh to Rs 1.69 lakh.
• The annual SIP flow from individual investors increased from Rs 44,000 crore in FY 2016-17 to nearly Rs 93,000 crore in 2018-19.

August 19 was the 26th time since 1990 that Nifty had 3 negative monthly returns in a row. We are seeing some forwards that claim that 3 consecutive down months have usually meant a positive return the next month. We wanted to check for ourselves and ran the same backtest all the way to 1990.

If we look at the past 25 instances that Nifty had 3 negative monthly returns, we do find a small positive return of 1.5 percent in the next month. Unfortunately, it is not statistically significant.

This follows reason as well. While everyone agrees that reversion to mean happens in the market, there is no reason for it to happen at precisely 3 down months. Our advice is to be very wary of such analysis of market timing and almost never ever to follow it.

On Friday, union finance minister Nirmala Sitharaman announced plans to merge 10 public sector banks into 4. This move will bring down the number of PSU banks to 12 from 21. According to the plan:

• Indian Bank will be merged with Allahabad Bank (anchor bank – Indian Bank).
• PNB, OBC and United Bank to be merged (PNB will be the anchor bank).
• Union Bank of India, Andhra Bank and Corporation Bank to be merged (anchor bank – Union Bank of India).
• Canara Bank and Syndicate Bank to be merged (anchor bank – Canara Bank)

The Central Statistics Office released GDP data for the April-June quarter on Friday. India’s GDP grew by 5percent in the first quarter of this Financial Year. In comparison, the GDP growth rate was 5.8 percent during the same period in 2018.

Index Returns

Source: BSE / NSE

Top 5 best performing funds

Source: Kuvera.in

Top 5 worst performing funds

Source: Kuvera.in

What Investors Bought

We saw the most inflows in these 5 Funds –

Source: Kuvera.in

What Investors Sold

We saw the most outflows in these 5 Funds –

Source: Kuvera.in

Movers & Shakers

1/ UTI Mutual Fund has announced the change in fund manager for a few schemes including UTI Mid Cap Fund and UTI Long Term Equity Fund.

2/ Axis Mutual Fund has announced that U R Bhat has ceased to be an Independent Director on the Board of Axis AMC and Venkataramanan Anantharaman has been appointed in his stead. The fund house also announced the appointment of Ravi Narayanan as a Director on the board of the AMC.

3/ Indiabulls Mutual Fund has announced that Rekha Warriar, Independent Director, has resigned from the Board of Indiabulls Asset Management Company Limited with effect from 27 August 2019.

4/ Edelweiss Mutual Fund has announced that K V Hegde has ceased to be an Independent Director of Edelweiss Trusteeship Company Limited, with effect from 24 August 2019.

Quote of the week:

There are no great limits to growth because there are no limits of human intelligence, imagination, and wonder: Ronald Reagan

Gaurav Rastogi is the CEO of Kuvera.in: India’s first completely free Direct Mutual Fund investing platform.

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How to select the best mutual fund schemes? Follow these tips

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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In recent years, mutual funds have become more and more popular in India. You might have seen the campaign by Amfi (Association of Mutual Funds of India), with its tagline, Mutual Funds Sahi Hai. Many investors have turned towards mutual funds via systematic investment planning (SIP) and lump sum investments. This number is on the rise and will continue to rise. Despite this rise in popularity, one of the biggest hurdles for a mutual fund investor is to decide which schemes to invest in, as there are hundreds of schemes to select from. At times, creating a portfolio of a few selected schemes which will help you achieve your financial goals becomes too complicated. So, let me share some tips for creating a mutual fund portfolio based on your risk appetite and investment style.

Select a few schemes which have had good and consistent performance over the years.

From this list, further shortlist schemes which suit your risk profile, financial goals, and objectives. This is very important because it has been observed that many investors, especially millennials, do not focus on the financial goal and the amount they need in a specific time period when they start investing in mutual fund schemes. The focus is mostly on selecting the top performing schemes on the basis of online search. In my experience of responding to readers’ queries over the years, this is the biggest challenge I have seen. People do not focus on their goals and the amount they need. They focus on the schemes only. Always remember the fact that all the mutual funds schemes which are available are good in their own way. The question you need to answer is whether they are good for you.

Finalise the percentage of money you would invest in each of these schemes

Once you finalise the amount you would be investing in each scheme, you need to create a mechanism to monitor your funds at regular intervals, do a thorough review, and take corrective actions if needed. This step is very critical and you must follow it diligently as mutual fund investments are subject to market risk and volatility. Any news affecting the economy and market at large will have an impact on your portfolio. So, you always need to be diligent and agile while monitoring your portfolio and take actions accordingly.

As far as reallocation is concerned, there is one more important aspect. If you have invested in mutual funds for long-term goals, you need to start moving that money to safer financial products, like bank deposits or debt funds at least two to three years before you actually need that money. Factor these years into your goals as well. This will help avoid the impact of sudden market volatility if any.

Rishabh Parakh is Chief Gardener at Money Plant Consultancy.

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KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow

Sebi seeks Amfi response on 23 irregularities by AMCs during 2016-17 audit period

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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The Securities and Exchange Board of India (Sebi) has issued a letter to the Association of Mutual Funds in India (Amfi), seeking the industry standards organisation’s response on 23 counts of irregularities by assets management companies (AMCs) during the audit period between April 2016 and March 2017.

In the letter dated July 30, 2019, the market regulator has mentioned several regulatory violations by AMCs. Among the more damaging findings is the failure to liquidate equity portfolio of close-ended schemes on or before maturity. This has happened with the MF holdings of Essel Group.

Sebi also found cases, where interest accrued but not due in fixed income securities, was not included in the calculation of exposure, which led to a breach of cumulative gross exposure limits in some funds.

Related to that is the charge that there have been instances of AMCs misleading investors by reporting incorrect data. What needs consideration is also the manner of communication itself — often a new fund offer is publicised and disclosures are buried.

The regulator also notes instances where performance of only select schemes are presented to board or trustee for review. The failure to report over-the-counter trades in debt securities quickly enough has impacted price discovery. This is important because AMCs have been complaining about the insufficient depth of the corporate bond market. Not having an internal system to segregate between existing and new investors leads to additional transaction tax on old investors.

There are a few points in the letter on the corrupt practices of distributors. Many AMCs continue to do business with and pay commission to distributors suspended by Sebi, in some cases even when their Amfi registration has lapsed. The AMCs’ failure to ensure direct plans have lower expense ratio vs regular plan. So, it’s quite apparent that the seeds of many of today’s troubling issues were sown by AMCs years back.

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KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow

Budget 2019: AMFI proposes level-playing field between ULIPs and MFs

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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With the upcoming Budget slated to be presented later this week, the Association of Mutual Funds in India has recommended a slew of proposals to Finance Minister Nirmala Sitharaman.

Here are some of the budget proposals of the Association of Mutual Funds in India (AMFI) for FY20.
1) Introduce Debt Linked Savings Scheme (DLSS) to deepen the Indian Bond Market

–Introduce Debt Linked Savings Scheme (DLSS) similar to the Equity Linked Savings Scheme (ELSS) to channelize long-term savings of retail investors into the corporate bond market, which would help deepen the Indian bond market.

— At least 80 percent of the funds collected under DLSS shall be invested in debentures and bonds of companies as permitted under SEBI Mutual Fund Regulations. Pending investment of the funds in the required manner, the funds may be invested in short-term money market instruments or other liquid instruments or both.

–Investments upto Rs 1,50,000 under DLSS be eligible for tax benefit under Chapter VI A, under a separate sub-Section and subject to a lock-in period of 5 years (just like tax saving bank Fixed Deposits).

— CBDT (Central Board of Direct Taxes) may issue appropriate guidelines/notification in this regard as done in respect of ELSS.

2) Uniform tax treatment in respect of investments in Mutual Funds Units and ULIPs of Life Insurance companies

a) Request for uniform tax treatment on Switching of Investments under Mutual Fund schemes and ULIPs of Insurance companies

— It is proposed that in case of Intra-Scheme Switches (i.e., switching of investment within the same scheme of a Mutual Fund) is not regarded as a “Transfer” under Section 47 of the IT Act, 1961 and be exempt from payment of capital gains tax

b) Request for Uniform tax treatment on Capital Gains from Mutual Funds investments and ULIPs of Insurance companies

It is requested to reconsider the matter and exclude the mutual units of equity-oriented mutual fund schemes from the ambit of LTCG tax and maintain status quo ante, insofar as LTCG (Long term capital gains) from equity mutual fund schemes are concerned, keeping the interest of the retail investors and to ensure level playing field between equity mutual fund schemes and ULIPs.

c) Request for removal of Tax Arbitrage between ULIPs & Equity MF Schemes on account of STT

–Abolish STT (Securities Transaction Tax) levied at the time of redemption of Mutual Fund Units by the investor.

d) Tax Arbitrage between ULIPs & Equity MF Schemes on account of DDT (Dividend Distribution Tax)

–Re-consider the matter and abolish the DDT on dividend paid under equity oriented mutual fund schemes maintaining status-quo ante, keeping the interest of the retail investors, and to have a level playing field and uniformity in the taxation of investment in MF schemes and ULIPs of Insurance companies.

— Eliminate DDT, when mutual funds declare dividends in their respective funds to the extent of dividends received by them from the companies to eliminate double taxation.

3) Uniform Tax Treatment for Retirement / Pension Schemes of Mutual Funds and NPS

— As in the case of NPS (National Pension Scheme), investment in Retirement Benefit / Pension Schemes offered by Mutual Funds up to Rs 150,000 should also be allowed tax deduction under Sec. Sec 80CCD (1) of Income Tax Act, 1961 (instead of Sec. 80C), within the overall ceiling of Rs 1.5 lakhs under Sec 80 CCE, with E-E-E status.

–Likewise, the additional deduction for investment up to Rs 50,000 under section 80CCD (1B) (presently available to NPS subscribers should be extended to investment in Mutual Fund Retirement Benefit / Pension Schemes, over and above the deduction of Rs 1.5 lakh under section 80C of Income Tax Act,1961.

4) Mutual Fund Units should be notified as ‘Specified Long-Term Assets’ qualifying for exemption on Long-Term Capital Gains under Sec. 54 EC

— Mutual Fund units that are redeemable after three years, wherein the underlying investments are made into equity or debt of ‘infrastructure subsector’ as specified by RBI Master Circular in line with ‘Master List of Infrastructure sub-sectors’ notified by the Government of India, be also included in the list of the specified long-term assets under Sec. 54EC.

–While the underlying investment will be made in securities in infrastructure subsector as specified above, the mutual fund itself could be an equity-oriented scheme or debt-oriented scheme, based on investors’ choice and risk appetite. The investment shall have a lock-in period of three years to be eligible for exemption under Sec. 54EC.

–Alternatively, a new sub-section 54EF be introduced, wherein long term capital gains from mutual funds can be reinvested in other mutual funds (on the same lines and rationale as 54EC for sale transactions in the immovable property) and long term capital gains can be saved by the investor.

5) Mutual Fund Units to be notified for as Long-Term Specified Assets for exemption on Long-Term Capital Gains under Sec. 54 EE

— Units issued by Mutual Funds that are registered with SEBI, having a lock-in for three years may be notified as “Long term specified assets” under Section 54EE.

Source: Moneycontrol

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3 Mins Read

Thursday’s filing dispelled some doubts, though Musk still has work to do. He and his advisers will spend the coming days vetting potential investors for the equity portion of his offer, according to people familiar with the matter

KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow