UPDATE ON 31-07-2020

Investors abandon mutual funds, flock to stocks and ETFs in July

June-July could see biggest two-month ETF inflows in a year, mutual funds headed for first monthly outflows in four years.

   

Investors are shifting from mutual funds to investing directly in stocks and exchange traded funds (ETFs) at the quickest pace in the recent years, coaxed by higher returns and ease of trading, according to market experts.

ETFs are likely to see an inflow of more than Rs 1,000 crore in July, said Nilesh Shah, managing director of Kotak Mahindra Asset Management Co. and chairman of the Association of Mutual Funds in India (AMFI). Equity mutual funds may see an outflow for the month, he said.

This will be the first monthly outflows since March 2016, according to AMFI data.

Investors are shifting from mutual funds to direct stocks and ETFs lured by the prospect of higher returns, according to B Gopkumar, managing director and CEO of Axis Securities. The average daily trading cash volume has risen from Rs 20,000 crore in FY19 to around Rs 32,000 crore this year and the average age of the investors have also declined, he said.

“ETF flows are a mix of institutional, HNI and retail, and the trend of their folio and AUM accretion is likely to continue in the near term,” according to Lakshmi Iyer, Chief Investment Officer (Debt) and Head Products, Kotak Mahindra Asset Management Company.

Equity flows continue to be net negative for July (month-to-date), she said.

ETF Inflows

Exchange and index funds seemed to have filled the gap in flows caused by equity mutual fund outflows. ETF, index funds, gold ETFs and funds of funds of overseas schemes saw a total inflows of Rs 8,660 crore for the April to June quarter, according to data from the Association of Mutual Funds of India (AMFI).

Experts see the surge in flows as a positive indicator of the gaining acceptance of ETFs. The flows into ETFs and index funds are seeing a steady increase over the years across segments. Large retirements funds such as the EPFO are actively allocating their corpus in ETFs and this bodes well for the long-term health of the markets as these flows are not tactical.

Some estimates point that retirement funds are allocating nearly Rs 2,500 crore per month to ETFs and Index Funds.

However, the baton for index investing seems to have gradually passed on to retailers and pensioners from institutions. So far, passive investing was driven by Employees Provident Fund Organisation, life insurance, and other government disinvestment mandates, but now retail interest is gradually rising, according to Anil Ghelani, Head of Passive Investments at DSP Mutual Fund.

Nippon India Mutual Fund has seen a spurt in investor interest in their ETFs in Q1 of this year. Nippon's investor base has increased by nearly 15 percent in Q1 itself and volumes in ETFs have increased significantly on the exchanges, according to Vishal Jain, Head, Nippon India ETF, who helps manage ETF and index assets worth Rs 27,500 crore.

Country call vs fund call

ETFs and Index Funds are gaining traction because they cost less, are simpler and provide an avenue to invest in the best companies at that point of time, Jain added. "It’s the easiest way to ride on the India growth story."

Consistently delivering outperformance over the benchmark is becoming difficult in case of large cap funds, Ghelani said. Investors look to switch to passively managed ETFs or Index Funds, from large cap funds, even while they retain their allocation for mid and smallcaps via actively managed mutual funds, he added.

The decline in inflows in equity funds is largely due to profit booking by some investors as markets moved up, according to Kaustubh Belapurkar, director of fund research at Morningstar. The ETF inflows are largely from the EPFO allocations which is coming into the NIFTY 50 index and Sensex 30 index ETFs managed by State Bank of India and UTI Asset Management, he added.

Robinhood Syndrome

Retail investors, especially millennials, are investing in the markets amid a coronavirus-induced lockdown in a trend that has swept across the globe. The trend has come to be known as Robinhood trading. In the US and Europe, a new breed of digital tech-savvy traders has emerged in the coronavirus pandemic. Brokers like Robinhood, Charles Schwab, E-Trade and others have disrupted the traditional brokerage system by offering commission-free trading and even free shares on occasion.

Also read: Brokerages lure record number of first-time investors to stock markets with dazzling incentives

The retail fervor has also swept across the ETF market. Retailers are shifting to ETFs from traditional funds as the products offer lower risk through the sector and stock diversifications and significantly lower costs compared to active funds, according to Koel Ghosh, the head of business development for S&P Dow Jones Indices in South Asia.

Not only that. Investors now realise that ETFs offer better return prospects in an atmosphere where bank deposit rates have fallen drastically. Investors can do a mix of active and passive investments to achieve their investment objective with the help of ETFs, Ghosh said.

ETFs are also offering an array of different products like market beta, factor indices and low volatility, she said.

ETF vs Index Funds

As investors flock to ETFs due to a firm belief in the India growth story, some fund houses are trying to expand liquidity to make the experience better for retail investors. DSP Asset Management and Nippon Asset Management are focusing on index funds as they have better liquidity than ETFs.

Retail investors could sometimes find it difficult to get good price discovery on the ETFs due to wider bid ask spreads, according to Ghelani. A high bid-ask spread, and low liquidity could weaken the investor experience, he said.

"While a large institutional investor would realize if spreads are high and possibly wait before the trade, some retail investors, including those investing via an automated platform or robo advisors, might get some trades at unreasonable price levels in some instances," Ghelani said.

While investing in index funds, investors subscribe or redeem at the NAV of the day which is a single official rate declared without any bid-ask spreads involved.

Potential risks

Retail investors are benefitting from the Robinhood phenomenon but they need to be mindful of the risks.

ETFs have got the bulk of their inflows from the corpus of the Employee Provident Fund Organisation. However, the COVID-19 induced lockdown has forced about 8 million EPFO subscribers to withdraw about Rs 30,000 crore between April and July 2020. Such large-scale redemptions may slow the inflows into ETF funds and investors need to be mindful of near-term volatility. (Saurce moneycontrol.com)

 

Aditya Birla Sun Life AMC onboards over 50,000 investors via video e-KYC during lockdown

 

Aditya Birla Sun Life AMC on Wednesday said it has witnessed an increase in paperless onboarding of customers, with the asset manager adding over 50,000 new investors with its video e-KYC system during the nationwide lockdown. To provide video e-KYC service, the asset manager had partnered Signzy to leverage its AI-based digital customer onboarding solution.

The technology enables a zero-contact, paperless system that replaces the need for physical submission of KYC (Know Your Customer) documents, Aditya Birla Sun Life AMC said in a statement.

The asset manager said it has already onboarded close to 1 lakh investors to the mutual fund industry with video e-KYC system since its adoption a year ago.

This artificial intelligence and machine learning enabled video e-KYC system replaces the need for document management, providing an ..

 

Inflows Into Equity Mutual Funds Fall For Second Straight Month In May

Inflows into equity mutual funds fell for the second straight month as benchmark indices remained volatile even as the economic activity continued to resume in phases. Net inflows into equity and equity-linked schemes declined 15% over the previous month to Rs 5,256.52 crore in May, according to data released by the Association of Mutual Funds in India. Net equity inflows had fallen by half in April on lower distributors’ activity amid the lockdown to contain the coronavirus pandemic.

All categories of equity schemes saw a decline. Net investments into the mid caps dropped to the lowest since AMFI started releasing granular data from April 2019. While inflows into large caps fell, they have remained above the Rs 1,000-crore mark for a year. “On the debt side, investors taking advantage of conducive reducing interest rates trend and shift towards high quality AAA-rated has resulted in a steady rise in net flows,” said NS Venkatesh, chief executive officer at AMFI. “Credit risk concerns have ebbed following regulatory support, redemptions have come down and we would see investors allocating higher quantum of savings to high quality debt paper.”
Contribution through systematic investment plans fell to the lowest in nearly a year at Rs 8,123 crore in May. Still, net investments managed to stay above the Rs 8,000-crore mark for 18 straight months. Swarup Mohanty, chief executive officer at Mirae Asset Global Investments Pvt., however, said a 6% drop in SIP from the peak numbers in just two months needs to be noticed. “If the stoppages are due to cash flow issues then it is understandable. If not then the basic concept of rupee cost averaging in SIP has not been understood by the investors,” 

UPDATE ON 27-06-2020

Equity Fund

Large Cap Fund

1. SBI BLUECHIP FUND (G)

2. HDFC TOP 100 FUND (G)

3.  DSP Equity Opportunities Fund

4. L&T Large and Midcap Fund

5. ICICI Prudential Large & Mid Cap Fund

 

Mid Cap Fund

1. Axis Midcap Fund

2. ICICI Prudential MidCap Fund

3. SBI Magnum Midcap Fund

4. L&T Midcap Fund

5. HDFC MID CAP Opportunities Fund

 

Small Cap Fund

1. SBI Small Cap Fund

2. HDFC Small Cap Fund

3. Axis Small Cap Fund

4. ICICI Prudential Smallcap Fund

5. Nippon India Small Cap Fund

 

Multi Cap Fund

1. SBI Magnum MultiCap Fund

2. ICICI Prudential Multicap Fund

3. Axis Multicap Fund

4. L&T Equity Fund

5. HDFC Equity Fund

 

Focus Fund

1. SBI Focused Equity Fund

2. Axis Focused 25 Fund

3. ICICI Prudential Focused Equity Fund - Retail - Growth

4. Nippon India Focused Equity Fund

5. HDFC Focused 30 Fund 

 

News:

  Mirae Asset Mutual Fund

 1.       Mirae Asset India Equity - (G)

       2.       Mirae Asset SF - Direct (G)

       3.       Mirae Asset Tax Saver Fund - DP (G)

 

   SBI 

 

1. SBI BLUECHIP FUND (G)

2. SBI Small & Midcap

3. SBI Magnum Multicap Fund (G)

 

 Aditya Birla sunlife

 

1. ABSLTOP 100 FUND REG (G)

2 ABSL  SMALL & MIDCAP FUND (G)

3.ABSL PURE VALUE FUND REG(G)

 L&T

 

1. L&T India Large cap

2. L&T EMERGING BUSINESSES FUND REG(G)

3. L& T India Value fund

HDFC

 

1. HDFC Top 200

2. HDFC MID CAP OPPORTUNITIES FUND (G)

 

 ICICI

 

1. ICICI Pru. focus blue chip.

2. ICICI Pru. Value fund.

 

Reliance 

 

1. Relaince Top 200

2. RELIANCE SMALL CAP FUND REG (G)

 

 

Sundram 

 

1. Sundram Select fund

2. Sundram Select Micro

3. Sundram Value Fund

 

IDFC

 

1. IDFC Imperial equity

2. IDFC sterling equity

 

 

 

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