The Hindu Business Line : Equity fund inflows not in pace with performance

THE bull run in the stock markets for the past few weeks has helped improve returns posted by equity funds to some extent, but investor confidence continues to be moderate at best, say asset management companies.

After three months of being net sellers in the stock market, mutual fund houses have now managed to buck the trend.Asset management companies, however, say that this has not resulted in significantly higher inflows into equity funds. "The index has been volatile, but actively managed funds have managed to post better returns than the index. However, the optimism in the stock market has not significantly translated into inflows for equity funds," said Mr Sandeep Dasgupta, Chief Executive Officer, Deutsche Asset Management India Private Limited.

Average returns posted by diversified equity funds have moved up to 4.24 per cent for the last month and 12.60 per cent for the last three months. The average three-monthly return for these funds was 7.82 per cent at the beginning of the August, indicating a significant positive movement.

Fund managers continue to be optimistic in their market outlook. The index looks strongly northbound, though there could be some corrections and profit booking, said Mr Samir Das, Joint General Manager (Finance), LIC Mutual Fund.

Distributors attribute the lukewarm response to these funds to retail investors' practice of investing after the markets have had a substantial run up. "This time, the markets have picked up fairly quickly from the fall in May. Retail investors tend to wait until there is a lot of hype about the market movement before they make their investment decisions. There is some inflow, but if the Sensex hits 5800 levels, then the trickle would become a steady flow," said the chief executive officer of a third party distribution company.