The growing optimism is partially backed by robust flows coming in from the domestic mutual fund industry inspite of choppy foreign fund flows over the past 12 months
Madhu Nair, Chief Executive Officer at Union Mutual Fund
Deepak Ramaraju, Senior Fund Manager at Shriram AMC
Ashwini Kumar, Senior Vice President and Head Market Data, ICRA Analytics FinTech BizNews Service
Mumbai, August 10, 2024: It was the 50th meeting of the Monetary Policy Committee (MPC) on Thursday since its inception in September 2016. MPC decided by a 4 to 2 majority to keep the policy repo rate unchanged at 6.50 per cent. Here are quotes of industry leaders on AMFI Numbers:
Sanjay Bembalkar, Co-Head Equity at Union Mutual Fund: “Mutual Fund Industry numbers underscore continued confidence of investors in Indian economy and Mutual Fund Industry despite global volatility. Thematic and Sectoral Funds seem to have piqued interest from broad investor base and have mobilized Rs.59,951 crores in past 3 months backed by new fund offerings. A structural shift is happening in the way investors are thinking about investments due to increase in financial awareness and ease of access.”
Sandeep Yadav, Head-Fixed Income, DSP Mutual Fund: “Central banks are not speculators. They are insurers. We stated this last year (2023) when markets expected US CPI to fall and FED to do multiple rate cuts. At that time Powell mentioned risks of early rate cuts were far more than delayed rate cuts. If fed cut early and inflation rose, the damage to economy would be far worse than if fed cut late and growth fell. And how correct was FED, as inflation took about a year to fall closer to projected levels.
RBI policy is in the same vein. If RBI were to sound dovish today, and inflation (or global yields) were to rise thereafter, then RBI would have played all its cards too soon. The base case expectation is that the inflation and growth would come down globally, and in India. However, RBI needs to be aware of what-if scenario. What-if inflation and growth do not come mimicking US in 2023?
Sometimes Central bankers' job may seem thankless. If growth indeed falls along with inflation, then a 20/20 hindsight would show that RBI has made a mistake today. However, it is more prudent for RBI to hedge against tail risks of higher inflation.
However, unlike central banks, we need to speculate to generate returns for our investors. We expect these tail risks of higher inflation to vanish in coming weeks. We expect most central bankers to be dovish – and we expect RBI will be too. We remain long on bonds.
Sanjay Agarwal, Senior Director, CareEdge Ratings: “The AUM of the Mutual Fund industry grew to Rs.65.0 lakh crore buoyed by inflows in debt mutual funds of Rs.1.2 lakh crore as well as equity funds of Rs.0.37 lakh crore. In June 2024, debt funds witnessed significant outflows of Rs.1.07 crore; these outflows are usually caused by quarter-end dynamics. However, in July the segment witnessed net inflows of Rs.1.20 lakh crore. Most of these inflows followed historical trends and were predicted. Meanwhile, inflows in equity funds have continued to remain in the positive territory for 41st months. All categories witnessed inflows in equity funds barring ELSS funds and focused funds segments. Thematic funds, though witnessed a decline from the previous month, still accumulated 50% of the equity monthly inflows reflecting investors’ confidence in thematic opportunities. Around 15 open-ended NFOs were floated in July, which together mobilised Rs.0.17 lakh crore with the highest contribution by sectoral/thematic funds of Rs.0.10 lakh crore.”
Ashwini Kumar, Senior Vice President and Head Market Data, ICRA Analytics: The volatility in domestic equity markets following heightened geopolitical tensions and concerns about an economic slowdown in China and the U.S notwithstanding, the Indian mutual fund industry continued to witness a robust surge in inflows in July. Net inflows into the mutual fund industry increased by 130 per cent at Rs 1.89 lakh crore in July 2024, as compared with Rs 82,046 crore last year. Net AUM grew by 40 per cent inching closer to the Rs 65 lakh crore mark in July 2024 and stood at Rs 64.97 lakh crore, as against Rs 46.38 lakh crore in July 2023. On a month-on-month basis, net AUM increased by 6 per cent from Rs 61.16 lakh crore in June 2024. Inflows into open ended equity mutual funds surged by over four times at Rs 37,113 crore in July 2024, as compared with Rs 7,626 crore in July 2023. The resilience of Indian financial market coupled with improved growth prospects of the Indian economy is boosting investor confidence leading to increased participation of retail investors thereby contributing to higher inflows into equity mutual funds. Among open ended equity mutual funds, sectoral/thematic funds saw inflows to the tune of Rs 18,386 crore during the month under consideration.
The sectoral/thematic funds come with a bias as they are inclined towards a theme or sector. In case the concerned sector/theme experiences some headwinds, then the entire fund may start to underperform as they have high exposure to a particular sector. This is in stark contrast to a diversified fund as it has exposure to multiple sectors and is well insulated from such sectoral shocks even though not completely immune to it. So before investing in sectoral/thematic funds, an investor should have a good understanding of the sector. It is also important to monitor the sector on a continuous basis and rebalance their portfolios regularly based on market developments. Inflows into open ended debt mutual funds surged by nearly 95 per cent at Rs 1.2 lakh crore in July 2024, as against Rs 61,440 crore in July 2023. Bond yields rose after the RBI maintained a status quo on interest rates and retained its hawkish policy stance with focus on bringing inflation down in its latest monetary policy meeting concluded on Aug 8, 2024. Losses were extended following a rise in U.S. Treasury yields as fears that the economy is quickly entering a recession were deemed exaggerated.”
View of Bajaj Finserv Asset Management:
• The RBI is in a wait-and-watch mode with an unchanged stance and liquidity management as the interim focus. A synchronized global growth downturn, expectation of a likely rate cut by FED in September and normal monsoon progression with contained core inflation implies that the policy focus may shift from inflation control to supporting growth gradually.
• We still maintain the same view, in fact recent data has increased our conviction. The liquidity has turned positive post-elections and has already pushed operative overnight rate below the policy rate of 6.5%.
• We recommend investors with a holding period of at least 1 year to consider investing in longer duration funds. The 10- to 15-year segment and longer end of yield curve stands to gain from any possible rate cuts in the next one year.
• Investors with lesser appetite for duration risk can consider Funds with moderate duration of 3-5 years.
Madhu Nair, Chief Executive Officer at Union Mutual Fund: “MF Industry assets under management at all time high at closer to 60 lakh crore mark (59 lakh crore) on the back on strong flows across all asset classes. Equity oriented schemes have crossed 25 lakh crores for the first time as a result of strong net flows and positive market action during the month of May 2024. Strong net flows in this category have come on back of flows from existing schemes and large NFOs in the thematic space. This also shows the maturity of Indian retail investors and their belief in the long-term structural story of India despite of the general elections during the month. With the continuity of the existing political regime and policies and on the back of strong corporate earnings, we expect continuity of strong flows from domestic MF investors. We at Union Mutual Fund believe that currently Indian markets offer good opportunity to invest and would urge investors to take advantage of Amritkaal (golden period for Indian economy) and stay invested and participate in nations wealth creation while keeping in mind of self-risk appetite, life goals and asset allocation.”
Parijat Agrawal, Head, Fixed Income at Union Mutual Fund: “As expected, the Monetary Policy Committee (MPC) kept the rates and stance unchanged. The MPC kept the stance unchanged due to ample systemic liquidity. The focus remains on bringing headline inflation on a durable basis to 4%. Although core inflation is in disinflationary trend, volatile food inflation is a cause of worry. Growth remains robust as visible in high frequency indicators. Global economic slowdown and financial market volatility is something which the MPC may have to address going forward. The evolving growth inflation dynamics point towards rate cut beginning from December policy.”
Deepak Ramaraju, Senior Fund Manager at Shriram AMC: As a fund house, we expected the status quo on the interest rates and the withdrawal of the accommodative stance. Inflation continues to be the number one priority followed by credit growth and deposit mobilization by the banks. RBI continued to keep the inflation forecast for FY 25 at 4.5%. Global factors such as rising interest rates in Japan, geo-political instability in the Middle East, rate cut by the Bank of England and timing of rate cut by the US Fed will influence the future monetary policy stance of RBI.”
Akhil Chaturvedi, Executive Director & Chief Business Officer, Motilal Oswal Asset Management Company: “Broad momentum in equity flows continue with 37k cr of Net flows, but more encouraging is the growth in SIP book from 21k to 23.3k cr (approx. 2k cr). There is still positivity on NFO’s especially in the thematic space with 13k cr of inflows. The marginal decline in the overall equity MF inflow by 9% and increased flow in debt funds can be attributed to the market volatility and global concerns amongst few investors. Investors with a long term view can continue to be positive on their investments with the India growth story in play.”
Swarup Mohanty, Vice Chairman & CEO at Mirae Asset Investment Managers (India): “The inflow data shows an underlying change in the mood of investors. They are shifting their focus from core side of the portfolio to the tactical or satellite side of the portfolio. This is evident from the fact that in the last two years, we saw small caps getting heavy inflows, which now is tapering as investors are now shifting to sectoral funds. It will be interesting to see if this is a shift in risk profile to it is just blatant near term return chasing.”
Manish Mehta, National Head - Sales, Marketing & Digital Business, Kotak Mahindra AMC: “Net equity flows were a tad lower compared to June. The inflow could be attributed to NFO listing and SIP inflows. Most of the lumpsum purchase seem to be through the NFO route.”
Dhawal Dalal, President & Chief Investment Officer – Fixed Income, Edelweiss MF: “The RBI MPC voted 4-2 to keep policy rates unchanged for the 9th consecutive policy. The policy stance was also kept unchanged. This is the last MPC for the external members who were majorly rooting for a rate cut. However, RBI remained cautious and focused on the sticky food inflation and its potential spillover effect on the broader inflation. Overall, it was a mildly cautious policy with a clear message on vanquishing the food inflation before considering a rate cut.”
