Mint Quick Edit | Mutual fund inflows signal household caution
Data for May shows a drop in India’s mutual fund inflows, although systematic investment plans (SIPs) proved resilient. It’s a story of mixed signals and varying horizons.
Net inflows into equity mutual funds (MFs) dropped 22% from April to ₹19,013 crore in May, the lowest in a year, according to data issued by the Association of Mutual Funds in India.
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That’s a substantial drop, no doubt, but not surprising, given all the flux in the global economy and the fact that Indian equity indices are still to regain their past peaks. Household investors may have grown cautious.
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While India’s economy grew strongly last quarter, at 7.4% year-on-year, its pace of expansion is now expected to weaken as external drags weigh in. That said, investments through systematic investment plans hit a fresh high of ₹26,688 crore last month. Though only fractionally up from April, the record flows through this route suggest that investors are taking a long-horizon view of their investments.
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With the Reserve Bank of India having unveiled a monetary stimulus, and with tax relief expected to do its own bit to perk up consumption, investors have some cause to hope that the economy will prove reasonably resilient this fiscal year in the face of economic uncertainties. Signs that these policy measures are working could boost market sentiment as well as the inflows of MFs.
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