Tax-saving schemes see spurt in inflows

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Robust sales in equity mutual funds (MF) have driven the industry’s assets under management (AUM) up 0.63% from Rs.10.06 trillion in July to Rs.10.13 trillion in August 2014, according to the Association of Mutual Funds in India (Amfi). Arbitrage funds have also been reported to get a significant chunk of the inflows into equity funds.

 The money is coming from broad based funds, said Suresh Soni, chief executive officer, Deutsche Asset Management (India) Pvt. Ltd. “Initially, we saw participation only from high net worth individuals, HNIs, (in April and May), but now we are seeing participation from across the board. We are seeing overall folios going up as the participation is broad based, and inflow into many kinds of funds—large-cap, mid-cap and diversified,” said Soni. Assets under the balanced funds category rose 6.64% to Rs.17,293 crore from Rs.16,217 crore in July, followed by the equity funds category, which rose 6.1% to Rs.2.35 lakh crore in August from Rs.2.21 lakh crore in July. Total inflow in balanced funds was Rs.700 crore in August, the highest since December 2012, this was mainly due to investments in existing schemes.

 photo But it was the AUM under the equity-linked saving schemes (ELSS) category that clocked a lifetime high—it rose 5.29%, from Rs.30,317 crore to Rs.31,921 crore. In August alone, the tax-saving schemes got inflows worth Rs.513 crore. The level was high in July as well, at Rs.472 crore inflow. Usually, the January-March period sees heavy inflow as people invest during this period to save on taxes. This year, however, since the deductions under section 80C were increased to Rs.1.5 lakh in July, the subsequent months might be witnessing the effect of that. D.P. Singh, executive director and chief marketing officer (domestic business), SBI Funds Management Pvt. Ltd, said investments first came from HNIs, but now retail investors are also coming in.

“Money is coming from the middle of the pyramid. Retail investors are putting in anything between Rs.1 lakh and Rs.25 lakh,” said Singh. Assets under equity exchange-traded funds (ETFs) rose 3.07%, but gold ETFs saw a decline of 1.44%, from Rs.7,773 crore in July to Rs.7,661 crore in August. Gilt and income categories also recorded negative growth of 3.45% and 2.23%, respectively. AUM under gold ETFs, in fact, reached a 36-month low of Rs.76.61 billion. According to a World Gold Council (WGC) report, India’s demand for gold was down 39% in the June quarter versus the same period last year, due to continuing restrictions on gold imports.

 The Council has re-calibrated its projected demand for 2014 to 850-950 tonnes from 900-1,000 tonnes.

PRASHANT SHARMA

PGDM-IIIsem