The month saw investors prefer Equity, ELSS, and Balanced funds over the money market category because of low yields on the latter. Consequently, the money market segment witnessed net outflow of Rs. 12,739 crore in June, while Balanced, Equity, and Equity Linked Savings Schemes (ELSS) saw strong net inflows of Rs. 7,458 crore, Rs. 7,453 crore, and Rs. 711 crore, respectively. Retail participation has remained strong as inflows through Systematic Investment Plans (SIPs) have been at a robust Rs. 43,921 crore in FY2017 and Rs. 4,584 crore in May 2017. Since April 2016, net inflows in the Balanced category has been Rs. 58,867 crore as investors seem to prefer it for higher risk adjusted returns.
Net inflows in Equity remain high
Equity funds (including ELSS) witnessed net inflows of Rs. 8,164 crore in June. Though the inflows are 24% less than the previous month, the figure is encouraging considering the overall flat markets. Investors are looking at equity funds as long-term investment avenues and the major source of inflow is SIP. SIP has been gaining popularity among Indian mutual fund investors as it not only helps in rupee cost averaging but also provides a disciplined approach to investing.
MF industry adds 10.4 lakh folios in June 2017
The total folio count at the end of June stood at 5.82 crore, 1.8% higher than May, according to data from the Securities and Exchange Board of India (SEBI). The growth was primarily on the back of 7.84 lakh new folios added to the Equity category (including ELSS) and 1.91 lakh new folios to the Balanced category. Since April 2016, 58.3 crore new folios have been added to the Equity and ELSS categories, suggesting investors are increasingly considering equity funds for long-term wealth creation. Investor awareness initiatives by Asset Management Companies (AMCs) and regulatory bodies are a big reason behind this growth.
The only categories to witness de-growth in folio count were Gold ETFs and Fund of Funds investing overseas. The drop-in count was 4,250 and 1,887, respectively, from May 2017.
Gross commission has almost doubled in last three years for top distributors
According to data from AMFI, the gross commission earned by mutual fund distributors has almost doubled in the last three years from Rs. 2,603 crore in FY14 to Rs. 4,987 crore in FY17. Top 10 distributors were given Rs. 2,379 crore commission by AMCs in FY17, representing 47.72% of the total commission paid to distributors. In the last three financial years, average assets under management of the top 10 distributors have increased from Rs. 1.43 lakh crore to Rs. 2.74 lakh crore.
Institutional investors prefer debt funds
The mutual fund industry’s assets are almost equally distributed between individual investors (retail and high net worth individuals) and institutional investors (corporates, banks/financial institutions and foreign institutional investors) at Rs. 8.7 lakh crore and Rs. 8.8 lakh crore, respectively, as of March 2017. Asset-wise composition shows that individual investors have higher preference for equity funds at around 53%. Institutional investors prefer debt-oriented funds at 85%, and out of this, liquid schemes form 32%.
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