Mutual fund net inflows plummet by 90% as spooked investors play safe

The spooked mutual fund investors have started dumping mutual fund schemes and net equity inflows touch a multi-year low.

The total redemptions in the overall mutual fund industry have surged by 20% on a month-on-month basis to Rs 9.54 lakh crore in June 2020, according to the data published by the Association of Mutual Funds in India (AMFI) on Wednesday. In May 2020, the total redemptions from mutual funds stood at Rs 7.95 lakh crore.

As a result of this, the net inflows into the mutual funds during the month stood at paltry Rs 7,265.67 crore, plummeting by 89.7% over May numbers. In the month of May, the net inflows into mutual funds stood at Rs 70,813.40 crore.

The hit has been more severe in the equity schemes, with net inflows at a multi-year low. The redemptions in equity mutual funds surged by 75.7% to Rs 13,520.03 crore, causing net inflows to plummet by 96% to Rs 240.55 crore. In the month of May, the redemptions stood at Rs 7,693.05 crore, while net inflows stood at Rs 5,256.52 crore. Among the equity schemes, multi-cap funds saw redemptions worth Rs 3,319.31 crore in June, while large-cap funds saw redemptions worth Rs 3,335.51 crore.

In the debt segment, the redemptions were driven by overnight and liquid funds, both witnessing redemptions worth Rs 4.37 lakh crore each.

“Equity inflows have slowed down as many investors are waiting for clarity on their own future cash flows before investing further. A portion of investors have also been caught by surprise over the sharp equity rally and are still waiting for lower levels to enter back. Future equity flows to a large extent will depend on how soon the confidence on future cash flows for individuals returns back to normal,” Arun Kumar, Head of Research at FundsIndia.com said.

The overall Assets under Management of the Mutual Fund industry grew marginally by 3.8% to Rs 25.49 crore, of which 12.37 lakh crore was allocated towards the debt schemes, Rs 6.89 lakh crore in the equities, and Rs 3.01 lakh crore in hybrid schemes.