NEW DELHI: Franklin Templeton’s move to close six credit risk funds on April 24 has resulted in a large flight of capital away from such securities, even as equity mutual funds saw inflows halve. According to data from the Association of Mutual Funds of India (AMFI), credit risk funds saw a net outflow of Rs 19,239 crore during the month as investors were spooked by the FT fund closures.
The ongoing impact of the pandemic on volatile markets have also halved net inflows into equity/growth mutual funds compared to the previous month.Net flows into this category stood at a four-month low of Rs 6,411.88 crore in April, down 47.33 per cent from March.
The reduction in equity fund inflows comes even as the Indian stock indices have improved significantly in April. The 14 per cent increase in the Sensex in April, for instance, is the sharpest monthly improvement since September 2009.Analysts said that investor sentiments remained depressed despite the improvement in the indices in April, but redemption pressure on both debt and equity schemes reduced during the month.
In the case of credit risk funds, the Reserve Bank of India’s April 27 move to open up Rs 50,000 crore of liquidity for mutual funds through banks has helped ease redemptions, despite the FT fund closures.
Credit risk funds have actually faced significant redemption pressure since the collapse of Infrastructure Leasing & Financial Services Ltd in 2018.
Redemptions in equity mutual fund schemes also dove during the month, at Rs 8,104.46 crore, down 54.80 per cent from March and 37.13 per cent from the year-ago period.AMFI chief executive N S Venkatesh said that “stability in redemptions indicate that investors’ confidence is returning to these schemes.”
“It is heartening to note that despite subdued economic scenario, retail investors are seen to be continuing with their goal-based investment discipline, displaying mature investment conduct, as seen from the month-on-month rise in retail Assets Under Management (AUM), as also the marked rise in the number of Systematic Investment Plan (SIP) accounts. Slowing redemptions in retail and overall mutual fund schemes are indicative of the rising investor preference for mutual funds as long-term wealth creation,” Venkatesh observed.
