Equity Mutual Fund Inflows Halve In April As Coronavirus Keep Investors Away

Inflows into equity mutual funds nearly halved in April, industry data showed, as many investors rattled by stock market volatility due to the new coronavirus and the impact of a lockdown on the economy chose to stay away.

Net flows into mutual funds that invest in equity fell 47 per cent to Rs 6,212 crore in April from Rs 11,722 crore in March, data published on Friday by the Association of Mutual Funds in India (AMFI) showed.

"I think (investors) are reassessing. They are trying to see how COVID has affected the first-quarter earnings and how the markets are moving," AMFI CEO NS Venkatesh said on a call with journalists.

The number of coronavirus infections in India rose past 55,000 this week, according to the health ministry, with the pace of new infections showing no sign of abating even as the country continues its nationwide lockdown in place since late March and ramps up testing.

That has brought economic activity to a standstill, raising fears of job losses, debt defaults and muted growth.

Stock markets plummeted in March but have since inched up as the government looked to open up the economy in parts. Still, volatility in markets remained elevated with calls for a larger fiscal stimulus from the government and support for the country's small and medium businesses.

"Until investors see stability in their cashflows, their jobs, their pays, the inflows going back to hay days would be very tough," said Vidya Bala, co-founder of PrimeInvestor, a mutual fund research firm.

Ms Bala said she expected 2020 to be a very "volatile" year with little to no growth in assets under management by mutual funds.

Systematic Investment Plans (SIPs), which allow an investor to invest a fixed amount regularly in mutual fund schemes and have been typically sticky even in turbulent markets, also took a hit.

Inflows from SIPs into debt and equity funds fell to Rs 8,376 crore in April from Rs 8,641 crore in March. SIPs have gained popularity in India, especially among retail investors, as they are less volatile compared with lump sum investments.

Debt funds saw inflows of Rs 4,343 crore as investments in liquid funds more than offset outflows from most other debt schemes.

Investors pulled out of credit risk funds the most, with outflows of over Rs 19,200 crore, after global fund house Franklin Templeton shut six credit schemes last month after struggling with illiquidity and redemption pressures amid the virus outbreak.