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Mutual funds may see debt to equity switch if rally sustains: experts

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Amidst Indian share markets clocking new lifetime highs in a pre-election rally, fund managers are expecting more funds outflows from debt schemes in favour of equities going ahead.

Such a switch will be visible if the rally continues after the April-May general elections as this would give confidence in equity asset class that has underperformed in the past five years, according to industry leaders.

"Some switch of funds from debt schemes to equity category funds are likely in the future if the market rally continues, which will give confidence to investors," IDBI Mutual Fund chief executive Debashish Mallick told PTI.

He, however, maintained that the recent diversion of funds from debt to equities is not significant as of now to call it a trend.

The equity fund category saw inflows for a fourth consecutive month in February with an addition of Rs 582 crore.

Assets under management under equity funds rose 3.3 per cent to touch Rs 1.81 lakh crore by the end of February.

Another fund manager expected funds moving into equities going forward.

"You can see some switch. We have seen some reshuffle in portfolios. But, these are not significant," said Dwijendra Srivastava, head of fixed income at Sundaram MF.

Some investment analysts, however, are of the opinion that even if the switch happens, it will not have any major impact on the debt category.

"The debt category is predominantly institution driven with low retail participation. So, even if some money switch happens, this will not be materially create any difference to the debt category," ING Investment executive director and chief investment officer K Ramanathan said.

Of the total Rs 9.16 lakh crore assets under management for the MF industry by the end of February, equity category assets under management (AUM) stood at Rs 1.81 lakh crore.



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