The newspaper publishes a lot of data on Mutual Fund and its numbers. As an investor does these figures have some indications or learning? Yes a lot, but you need a proper base to compare. Standalone numbers will not speak anything or provide insight. They may be used to distort any picture. Learning Mutual Fund Trends is one of the ways to see how economy and investments scenario is shaping up.
Let’s try to interpret these “Torture Numbers”
Why am I using the words- torture numbers? This is because as statistics distort them and numbers speak out of meaning. Any number can be shown as a positive thing or can be described negative just by changing some base. Look at this example.
“Industry witnessed Net Outflow in Jun’17 to the tune of -16,592 crs, lesser than last month.”
Now you will think the industry is going down. So some equity trader will use this and say “MFs are Dead”
But one has to look for the details. The truth is that we need to see which category got money and which lost.
MFs added money is these categories:
- Balanced funds lead the pack for the month with 2nd best all time high monthly inflow at Rs.7,458 crs.
Obviously markets at all time high so investor investing in a balanced category or large cap category. My hope is this is as per their risk appetite and goals. It will not work if this investment is blind sighted.
- Equity funds (ex ELSS) followed with an inflow for the month at Rs.7,453 crs, but down from the previous 2 mths.
Money still coming but slowing down.
- Other ETFs with Rs.1,365 crs of net inflow, witnessed better pace than last 2 mths.
Passive investing is increasing. Soon the global trend will be popular in India as it reduces timing and cost. Also beating index is getting tougher day by day. But this is not a trend as the hidden reason for the surge is -the PF Trust funds invest money at the end of the quarter and they are allowed to invest in Top 100 stocks, so they prefer index funds. So it is not common investor putting money, but this is institutional money. Amazing insight. I hope so.
- ELSS brought an inflow of Rs.711 crs, better than the last 2 mths figure and inflows were seen during the first 7 mths of FY16-17.
Good as we also encourage not to wait til Feb or March. As late minutes discussions are often wrong and heaven for mis-sellers.
MFs lost money is these categories:
- Income funds witnessed higher outflow of the month at -20,685 crs.
June month had a review of Monetary & Credit Policy by the Central Regulator RBI. The market anticipated a cut in the repo but since RBI did not oblige the investors got scared and changed hands. Tragic as few investors try to time the debt market. They put or pull money based on certain event outcome perception and not the goals, asset allocation or risk. Not advisable.
- Liquid funds saw an outflow of -Rs.12,739 crs, lesser than last month.
This was the quarter end and we all know liquid funds is around 50% of the industry. Companies need to show cash in the quarterly Balance sheet as Cash or Money in hand. So they withdraw on last day of the month and invest on the first day of next month. Yes, this is a reality.
- Other categories with net outflows were, FoF Overseas -39 crs, Gold ETFs -81 crs (8th month in a row) and Gilt funds -35 crs (7th month in a row).
Another painful number
NFO Sales for the month stood at Rs.3,728 crs with 52% coming from equity schemes and 48% from debt schemes.
Should really be investing in New Funds? That too in equity funds? That too in laughable thematic funds like “GST Beneficiary” or “Resurgent India”?
But investor asks a reverse question.
Should Mutual Fund companies be launching these funds at this time?
Well, market forces will not leave a stone unturned to make profits. But when it comes to personal finance it is your future in questions. Any step like this can cause huge downfall to the portfolio. Buyers Beware, Buyers Be-Aware.
Here are some true numbers for June for MF industry with proper basis of comparison:
Equity AUM= 5,25,264 Crs Up by 38% yoy
ELSS AUM = 66,113 Crs Up 42% yoy
Balanced AUM = 1,09,513 Crs Up 138% yoy
Other ETFs = 48,359 Crs Up 152% yoy
Income funds = 7,78,266 crs, Up by 26%yoy
Liquid funds = 3,44,923 crs, Up by 41% YoY
Gilt, Gold ETFs, FoF o/s AUM has degrown yoy
Simplicity is deep and silence but full of wisdom.
Will MF industry Grow in Future? Should you be a part of it?
Yes, it has already grown at more pace than our banks. The trend will continue.
This is what Association of Mutual Funds in India (AMFI) and Confederation of Indian Industry has to say about the growth:
In my experience, Mutual Funds outflow is linked to economic markets and equity performance. When this stops or economy faces downturn the so-called “smart” investors will run. Yes many of them… Its a trend too historically proven. Good for us as we are value based guys.
Our investment is purely timeless (long term), goal based and invested with due consideration to risk and asset allocation. We balance it regularly. We stay away from the noise. We do not let biases take our profits. And we do not panic.
So, yes whatever happens to this Mutual Fund industry we will keep investing until the industry turns sinful.
Share your views and your experience as a mutual fund investor.
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