Talking to ET Now, A Balasubramanian, CEO, Birla Sun Life AMC, says per month inflow in SIPs could cross Rs 10,000 crore by end of the financial year.
The markets are looking a little nervous. The picture on the floor is turning weak for the month of March. How worrisome do you consider this trend to be?
There is no doubt March was worse than the previous month and may be the last few months. We need to take this number in two parts — one the equal number that has been reported by MFIs which includes arbitrage funds and in arbitrage fund, we have seen outflow in March either for booking profit or before the 31st of March balance sheet ending. Therefore, some people have redeemed them.
If I knock off arbitrage fund outflow, the net inflows in equity, the pure equity schemes balanced fund schemes have been higher than the number that has been reported in the MFI side. Having said that, historically we have seen that March is generally not a very good month for good inflows and historically has seen some slowdown.
At the same time, SIP as a concept has seen quite significant corporate depth in the last few years. Actually, the SIPs continues to have reasonably good registrations and the SIP books keep increasing. Post budget, the introduction of LTCG, put some kind of question mark on the relative attractiveness of equity as an asset class. And therefore fixed income as an asset class is beginning to see some kind of pick up.
Redemptions have generally picked up in bad markets. Do you think redemption pressure also has started?
It could be a temporary phenomena. Two kinds of redemptions are coming; 1) traders who come for investing in one-one and a half years and they would be looking at redeeming. The retail investors who come for long term, do not tend to redeem. That is why we generally observe that the level of investors in the last few years have been going up, which essentially means, he is willing to stick to his investment, keeping in mind the need of investing in mutual funds for long and not for short term.
2) Having said that, we will see some bit of redemptions due to market volatility. Somebody would have come for dividend purpose and once his purpose is achieved, he will redeem. You will probably see the info that has come in March due to the dividend declarations by most of the mutual funds. We will see that money moving out after say nine -month period. That is actually more of a tactical allocation which the investors would have done and those tactical allocations would also move out once the purpose is met.
How is the stance of HNI and retail towards mutual funds in general? Is the allocation improving?
Yes, definitely. In the last few years, the maturity of investors have been rising and I generally call it post 2008-2009 crisis in the financial market. That is the time I noticed the investors worry for redemptions were far lower than investors query for investing in mutual funds.
That itself reflects than what is the kind of curiosity which customers are building in when the markets turned volatile.
The curiosity over a period of time keeps rising mainly for investing in mutual funds at every volatility. Financial advisors or distributors across the country have been handholding the customers entering into the mutual funds with SIP and also making them realise that the mutual fund is meant for long-term investing.
I keep looking at SIPs. SIP mostly are subscribed for five years and 10 years or perpetuity. The number of months for which the SIP remains invested actually it goes beyond five and a half to six years. Even on the retail, the period for which the investments are being held by the investors actually goes anywhere between four and a half and five years. This indicates that major levels of investors are rising.
What is the average SIP level on a monthly level that you are expecting and do you expect the flows to continue in the same manner?
Last year, we were estimating the numbers will cross two crores in terms of account with an aggregate flow of close to about Rs 5000-5,200 crore and today aggregate monthly inflows in SIP has not only crossed the 2-crore account, it has also now crossed Rs 6,000 crore.
58% was the growth last year and the actual number on year-on-year basis. Do not assume 58% growth will come continuously for a longer period because last year was exceptional in the post demonetisation period.
Even if we assume it will grow at about 30-35% in SIP alone, that is now becoming the mode of investing in mutual funds. I would not be surprised if this number on a per month inflow basis, crosses Rs 10,000 crore by end of the financial year. The two crore number keeps rising by anywhere between 30-35 lakh accounts and that should continue.
How do you see MF flows in 2019?
We see the per month run rate in general at anywhere between Rs 20000 crore and 30000 crore. That is a pretty wide range. We saw an exceptional month of September, October, November last year. So, remove those exceptional months and look at the SIP which is close to about Rs 6000 crore. An average run rate in mutual fund inflows in equity should be around Rs 10,000- 14,000 crore.
There will be net inflows that one could expect given the fact that more and more acceptance is getting developed from investors to consider mutual fund as a part of their investment bouquet. Therefore. that number will continue.
This week is extremely critical for equity markets because we are going to be officially kick-starting earnings with Infosys on Friday. Tell me the trends that you are looking out for from Q4 numbers?
For the first time we are seeing earnings where companies are showing an uptick and of course the markets are turning a little volatile. At the same time, lead fuel indicators such as higher passenger traffic, commercial vehicle sales and the way the operating cost has come down, is being reflected on the two-wheeler sales and AC sales.
All of them are pointing towards improvement in the overall profitability numbers. We will probably see a lot of upgrades of earnings, a lot of positive earnings surprises in 2018-19. That think should be the trend that one should expect. The growth momentum is coming largely coming on the back of the consumer segment.