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Despite volatility, SIPs inflows at all-time high
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The mutual fund industry received an average monthly inflow of Rs.7,650 crore through SIPs between July and September 2018.

The latest AMFI data shows that the mutual fund industry has been receiving an average monthly inflow of Rs.7,650 crore through SIPs. This is the average monthly inflow of three months for the period July to September 2018. In the preceding quarter, i.e., between April and June 2018, the average monthly SIP inflow was Rs.7,182 crore.

In September alone, the monthly inflows in mutual funds through SIP reached an all-time high of Rs.7,727 crore.

Overall, the data shows that the industry mopped up close to Rs.44,500 in the last six months through SIPs, which is much higher than the first six month of SIP inflows in FY 2017-18 and the entire year SIP inflows of FY 2016-17.

Another good news for the mutual fund industry is the increase in the SIP accounts. Mutual fund SIPs accounts stood at 2.44 crore in September. AMFI data shows that the MF industry had added about 10 lakh SIP accounts each month on an average during the FY 2018-19, with an average SIP size of about Rs.3,200 per SIP account.

In terms of average AUM (AAUM), the mutual fund industry crossed an Rs.24 lakh crore in September 2018. AMFI’s latest data shows that AAUM of the MF industry has reached Rs.24.31 lakh crore in September 2018, which is slightly lower than AAUM of August 2018 at 24.70 lakh crore.

However, the monthly AUM of industry stood at Rs.22.04 lakh crore in September 2018 due to large-scale redemption from corporates and institutional investors from the debt funds to pay advance tax.

While AAUM is the average assets of the entire month, which is calculated by factoring in all working days of the month, month end AUM is the assets of the industry as of the last working day of the month.

Experts say that the growth has come largely because of higher inflows in balanced funds, arbitrage funds and equity funds through SIPs.

NS Venkatesh, CEO, AMFI attributed this growth to increasing participation of retail investors. He said, “Despite the market volatility and the credit event which occurred, the flows in equity segment of the market from the retail investors have been positive. It showed an amount of about Rs.12,000 crore of positive inflows. The quarterly average AUM for the quarter ended September 2018 shows a year on year growth of 16%. There has been a robust growth in the number of folios at 26% annually, which now stands at 7.75 crore. SIPs continue to show an increasing trend with Rs.7727 crore of funds mobilized in September 2018.”

MFs pump over Rs 11,600-cr in equities in Sept; FPIs in sell-off mode
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Investment in domestic equities by fund managers could be largely attributed to retail investors who continue to invest through systematic investment plan (SIP). NEW DELHI: Mutual fund houses have made investments of over Rs 11,600 crore in domestic equities in September despite volatility in stock markets, even as foreign investors pulled out a massive Rs 10,825 crore. The sell-off by foreign portfolio investors (FPIs) from the Indian equity markets has provided an opportunity to mutual fund managers, experts believe.

According to the latest data available with the markets regulator Sebi and depositories, fund managers lapped up shares to the tune of Rs 11,638 crore last month. On the other hand, FPIs pulled out Rs 10,825 crore from equities.

Investment in domestic equities by fund managers could be largely attributed to retail investors who continue to invest through systematic investment plan (SIP).

"Despite the market volatility and the credit event which occurred, the flow in the equity segment of the market from the retail investors has been positive," Association of Mutual Funds of India (Amfi) Chief Executive N S Venkatesh said.The 30-share Sensex slumped 6.2 per cent last month owing to sharp fall in the rupee and boiling crude oil prices, turning FPIs into net sellers.

Himanshu Srivastava, senior analyst manager research at Morningstar said while FPIs sold shares in September, domestic mutual funds continued to pump assets into the Indian equity markets and the staggering difference in their approach could be attributed to the fact that both view the markets from different lens.

For FPIs, India is just another investment in their portfolio. They continuously evaluate India against other comparable markets and see what investment proposition it has to offer. They will not hesitate in trimming their exposure to India if it does not fare well on the risk-reward profile.

"Hence, due to deteriorating macro factors and increasing tension over global trade war, FPIs have been trimming exposure to India over the last few months," he added.

As for domestic equity mutual funds, Srivastava said their only hunting ground is the domestic stock markets. In fact, the recent market correction has provided a good buying opportunity for investors, and pleasingly, mutual funds are trying to capitalise on the same, which is an ideal approach.

Investors rush to mutual funds, 65 lakh folios added in H1FY19
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This follows an addition of 1.6 crore investor accounts in 2017-18 fiscal. Growing investor interest in mutual funds has led to an addition of over 65 lakh new folios in the first six months of the current fiscal, taking the total to an all-time high of 7.78 crore at the end of September. This follows an addition of 1.6 crore investor accounts in 2017-18 fiscal, over 67 lakh folios in 2016-17 and 59 lakh in 2015-16 financial year. Folios are numbers designated to individual investor accounts, though an investor can have multiple accounts. According to the data from Association of Mutual Funds in India (AMFI) on total investor accounts with 41 fund active players, the number of folios rose to a record 7,78,86,596 at the end of September this year, up from 7,13,47,301 at the end March 2018, registering a gain of 65.39 lakh. Over the last few years, investor accounts have increased following robust contribution from retail investors, especially from smaller towns and huge inflows in equity schemes.

Folios in equity and equity-linked saving schemes (ELSS) grew by 56 lakh to 5.91 crore. Besides, folios in balanced category surged by close to 4 lakh to 63 lakh during the period under review. Further, folios in income funds rose by 5.2 lakh to over 1.12 crore. "There has been a robust growth in the number of folios, which now stands at 7.75 crore," Amfi CEO N S Venkatesh said.

Overall, mutual funds have seen an inflow of over Rs 45,000 crore during April-September period of the current fiscal (2018-19), while equity schemes alone attracted an impressive inflow of Rs 60,475 crore. However, a net withdrawal of Rs 85,280 crore was witnessed from income schemes -- a type of debt mutual funds that deliver a steady income. Besides, gold ETFs continued to see a net outflow of Rs 274 crore.

Mutual funds are investment vehicles made up of a pool of funds collected from a large number of investors. The funds are invested in stocks, bonds and money market instruments, among others.

Wait! Don’t sell your debt mutual fund investments. You might get better returns next year

For some time now, returns from bond funds have been muted, particularly long duration funds. On top of it, due to incidents of the recent past, there are concerns on the credit risk aspect of debt funds.

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For some time now, returns from bond funds have been muted, particularly long duration funds. On top of it, due to incidents of the recent past, there are concerns on the credit risk aspect of debt funds. Investors are concerned about what should be done now. The advice is, unless there is a cash flow requirement, there is no urgency to redeem. The argument Market / volatility risk and credit risk are part and parcel of debt funds.

For more than a year now, bond yields have been going up, i.e., prices have been coming down, due to various reasons. The market has taken note of multiple negative factors in the process of yields moving up, and it is about time that yield levels should stabilise. Nobody can call the peak or bottom of a market, hence there may still be some more scope of adverse movements. However, after a long negative phase, when the 10-year government bond yield rose from 6.4% in the middle of last year to more than 8%, the probability of further adverse movement is limited.

The regulators are doing their bit; the gross government borrowing programme for the second half has been reduced significantly and Reserve Bank of India (RBI) has announced OMO purchase of G-Secs for October. Coming to credit risk, it is an inherent feature of bonds. The situation seems grim, due to the headlines of companies defaulting, companies being taken to NCLT, a large company being downgraded sharply, etc.

Here again, the situation is not as bad, only that the unfortunate cases get magnified and the situation seems that much worse. On the marquee default case, the government has stepped in and changed the management of the company and hopefully, the company will turn the corner. Concept of accrual One difference between equity and debt funds is that in equity, returns come from price appreciation only, dividend yield being miniscule, say less than 2%.

In debt funds, most of the returns come from accrual and only a small component comes from price appreciation. Accrual refers to the coupon or interest earning on the securities, which in loose terms is represented by the Yield to maturity (YTM) of the portfolio. The portfolio YTM is the weighted average yield of all the instruments in the portfolio.

Over the last year or so, when bond prices have been coming down, yield level has been moving up, hence the accrual going forward will be at a higher level.

Mutual Funds' asset base reaches all-time high of Rs 25 lakh crore
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Indian mutual funds’ Assets under management (AUM) reached an all-time high of Rs 25.2 lakh crore buoyed with inflows of Rs 1.75 lakh crore in August 2018.

Equity markets rallied in August and the Nifty gained 3.9% and investors continued to repose their faith in systematic investment plans (SIPs). Collections through SIP schemes touched a new high of Rs 7654 crore, a jump of Rs 100 crore over the previous month with many new investors choosing SIPs.

Aided by SIPs, retail inflows have been positive for 29 consecutive months and overall numbers of folios have risen for 51 months in a row. This has translated into mutual fund industry AUM crossing Rs 25 lakh crores.

The bulk of the inflows in August were in liquid /money market funds with the category gaining Rs 1.71 lakh crore AMFI data showed. Higher interest rates and a rise in bond yields saw investors move out of high duration products such as income funds and gilt funds with both categories seeing outflows of Rs 6520 and Rs 283 crore respectively. Equity mutual funds including ELSS funds saw an inflow of Rs 8375 crore, though a bulk of it came through the SIPs and new fund offers (NFOs).

The industry added 6 lakh SIP accounts in August taking the total number to 2.39 crore, while AUM from SIP rose to Rs 2.32 lakh crore, which is 9.2% of the overall AUM.
“Acceptance of mutual fund as an investment product is increasing rapidly amongst the new generation of investors. Retail investors are showing faith in equities and allocating through SIPs, while HNIs are on the sidelines, allocating money only through systematic transfer plan (STP) as they fear weak macros and upcoming state elections,"

Higher oil prices, a depreciating rupee, high valuations and uncertainty on growth in corporate earnings, were key worries.

“Apart from SIP flows, lump sum flows have slowed down substantially from the peak, reflecting cautious mood in markets. Many investors are waiting on the sidelines to invest. A drop in oil prices, increase in FII flows or a drop in valuations will act as a catalyst for them to invest,” The industry's AUM had crossed Rs 10 lakh crore for the first time in May 2014 and in a span of 40 months, doubled to Rs 20 lakh crore in August 2017, moving to Rs 25.2 lakh crore over the last one year.


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