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MOSL: FUND FOLIO (August 2019)-Equity inflows at nine-month high; Defensives gain attention

FUND FOLIO (August 2019): Equity inflows at nine-month high; Defensives gain attention

Key observations

** High market volatility of the past two months coupled with the lack of fiscal stimulus in the budget and the proposal to levy surcharge on FPI led to low investor sentiment in Jul’19. Despite the elevated volatility and sharp correction in mid/small-caps, investor faith in mutual funds remained firm with steady inflows; in fact, contribution to systematic investment plans (SIPs) touched record high of INR83.2b in Jul’19.

** Notably, foreign fund exodus (USD1.9b) was the highest since Oct’18 as the budget proposal on super-rich taxation and FPI surcharge marred sentiment. DII inflows, however, spiked to USD3b – the highest since Oct’18, contributed by domestic MFs at USD2.2b and DIIs (ex MFs) at USD0.8b.

** Total AUM of domestic MFs – after declining 6.5% in Jun’19 – increased 1.2% MoM to INR24.5t in Jul’19, led by inflows in income/debt-oriented, equity and ETF schemes.

** Equity schemes (including ELSS and Arbitrage) saw net inflows increase to INR140b in Jul’19 (v/s INR107b in Jun’19), led by higher gross inflows at INR302b in Jul’19 (+21% MoM); redemptions were up 13% MoM at INR161b.