MF Update: Equity inflows in FY19 down by 35 per cent

The financial year just ended (FY19) saw a sharp downfall in the investment in equity mutual fund schemes. In the past financial year, mutual fund investors invested Rs. 1.11 lakh crore in equity-oriented mutual funds, which is down by 35 per cent on a yearly basis.

The single most important factor that led to such a decline is a volatile equity market that has kept many investors at bay. Various factors have added volatility to the Indian equity market in FY19. It all started with the implementation of LTCG, dividend distribution tax. This was followed by market concerns over NBFC credit events, which many described as India’s ‘Lehman Brothers’ Crisis moment and finally border tensions with Pakistan all this had a negative effect on equity markets in the last financial year.

Nevertheless, the impact of these events is not as severe as they would have been in normal circumstances. This can be gauged from the fact that in a similar situation foreign portfolio investors (FPIs) remained net sellers of local shares worth Rs. 44,500 crore. Moreover, the investment through SIP route has remained intact and has increased by 38 per cent on a yearly basis to Rs. 92,693 crore. Therefore, very few investors who would invest in lumpsum have only stayed away from the MF investment and not all investors.

Going ahead, if the market continues with its good show, we believe inflows into mutual funds will definitely increase.