Equity Mutual Fund Inflows Plummet 95% In June As Investors Book Profits

Inflows into India's equity mutual funds slowed to a trickle in June even as stock markets recovered sharply, as investors worried about the impact of the new coronavirus on their livelihood chose to book profits and stay away. Net flows into mutual funds that invest in equity dropped more than 95 per cent to Rs 241 crore in June from Rs 5,257 crore in May, data published on Wednesday by the Association of Mutual Funds in India (AMFI) showed.

"Some of the people would have taken their gains because the market has picked up substantially," AMFI CEO NS Venkatesh said on a call with journalists. "Maybe they are now waiting on the sidelines and then they'll re-enter at an appropriate time."

The stock markets plummeted in March but have since recovered more than 40 per cent, driven by a flush of liquidity as central banks around the world cut rates to counter a coronavirus-inflicted economic slowdown.

But investors are worried about job losses and salary cuts hurting their income after India's two-month lockdown - one of the world's strictest - ground businesses to a halt.

That also led to a drop in inflows into Systematic Investment Plans (SIPs), which allow an investor to invest a fixed amount regularly in mutual fund schemes, to Rs 7,927 crore in June from 8,123 crore in May.

"Future equity flows to a large extent will depend on how soon the confidence on future cash flows for individuals returns back to normal," said Arun Kumar, head of research at online investment platform FundsIndia.com.

"A portion of investors have also been caught by surprise over the sharp equity rally and are still waiting for lower levels to enter back," he said.

Investors are also concerned about soaring new infections as the economy opens up, the government's lukewarm economic stimulus and grim economic forecasts.

Inflows into debt funds also fell 95.5 per cent to Rs 2,862 crore, dragging overall inflows down about by 90 per cent.