It seems equity mutual funds have warded off the ongoing crisis in the debt funds that has shaken the NBFCs and some other housing finance corporations. In May, mutual fund inflows to equities improved marginally. According to a research conducted by Kotak Institutional Equities, the inflows were at Rs 2,700 crore in the month under consideration as against Rs 2,000 crore in April 2019, due to higher gross inflows.
This compares to Rs 9,500 crore inflows in March, Rs 4,400 to Rs 6,600 crore in December 2018-February 2019 and Rs 8,600 crore to Rs 10,700 crore in the preceding 6 months. Interestingly, SIPs are broadly stable over the past few months at Rs8,000 to Rs 8,200 crore inflows; this meant that the non-SIP flows reported large net outflow, the research said citing Association of Mutual Funds in India (Amfi) data.
Like April, Fixed Maturity Plans (FMPs) continued to bleed in the month of May as well. FMPs, which invest in debt instruments like corporate bonds, saw an outflow of Rs 1,797 crore in May, while in April, the outflow stood at a whopping Rs 17,644 crore. The FMPs came into focus when Kotak AMC declared it will delay the maturity payment in early April. HDFC MF also delayed the FMP payment around the same time as Essel Group, asking for time till September 2019, for releasing interest payments.
A latest data from Amfi showed that average Assets Under Management (AUM) of mutual funds rose to Rs 25.43 lakh crore in May from Rs 25.27 lakh crore in the previous month on the back of increased inflows into equity-linked schemes. Systematic Investment Plans (SIPs), which are a hit among retail investors due to their ease of making investment tag, saw a decline in the month under review. In May, retail investment through SIPs declined to Rs 8,183 crore from Rs 8,238 crore in April, the Amfi data revealed.
The crisis in mutual funds industry was triggered by collapse of Infrastructure Leasing and Financial Services (IL&FS) in September 2018. Big and small mutual fund houses and EPFO were among the hordes of investors in IL&Fs that took a beating, and many of them had to mark down NAV of their investments. The IL&FS through a complex web of special purpose vehicles (SPVs) invested in building infrastructure across the country and at the same time extended disproportionate loans to many entities. For example, some companies managed to get loans more than their total market value from the IL&FS. This is one of the aspects under the crosshairs of the investigating agencies.