Investors pumped in nearly Rs 75,000 crore in equity-oriented mutual fund schemes in 2019, a sharp plunge of 41 per cent from the preceding year, mainly hit by extreme market volatility amid slowing economic growth.
Experts, however, are of the view that equity schemes will attract investor interest this year as the market is expected to perform well.
"While volatility in the market may continue for some more time going forward, we believe investors will want to benefit from this volatility and use it to create and growth their wealth. As we expect industry inflows to rise, we believe that all categories of mutual funds including equity funds to see a steady rise in flows," said Ashwani Bhatia, MD and CEO at SBI Mutual Fund.
According to data with Association of Mutual funds in India (Amfi) equity and equity-linked saving schemes (ELSS) attracted an inflow of Rs 74,870 crore in 2019, much lower than Rs 1.2 trillion seen in 2018.
In 2017, such schemes had witnessed an impressive inflow of around Rs 1.33 trillion as compared to Rs 51,000 crore in 2016. Equity schemes have seen a little bit of a slowdown in 2019 as compared to the past few years because of extremely volatile markets, L&T Mutual Fund chief Kailash Kulkarni said.
The pace of inflows in equity funds tapered off towards the end of the year with the inflow in such schemes hitting a 41-month low of Rs 1,312 crore in November as investors did not see the index returns in their own funds. Besides, weakness in the mid and small-cap space dented the investor confidence, said Vidya Bala, co-founder of Primeinvestor.in.
Equity flows have two components -- systematic investment plan (SIP) and non-SIP. Flows through SIPs have consistently grown over the years and have touched more than Rs 8,000 crore on a monthly basis, while the non SIP flows are volatile based on the investor's need for money and view on the market.
Overall, fund houses have garnered Rs 82,453 crore through SIPs -- a preferred route for retail investors to invest in mutual funds as it helps them reduce market timing risk.
The industry added over 9.55 lakh SIP accounts each month in the year with an average SIP size of about Rs 2,850 per SIP account.
"SIPs have been the bedrock of equity flows and we think this will continue to the case in the coming year too. As and when there is are greater signs of economic turnaround, we can see equity flows surge further through lumpsum flows," Kaustubh Belapurkar, Director Manager Research at Morningstar Investment Adviser India said.
Kulkarni said, "SIP will continue to go from strength to strength and if you see a slight market rally between now and the end of 2020 you will start seeing more number of investors believing in and a word of mouth publicity in terms of how SIP benefits investors will ensure that the next set of investors come in to this facility".
The asset base of equity MFs stood at Rs 8.04 trillion at the end of December 2019 as compared to Rs 7.87 trillion in December-end 2018.