Mint Quick Edit | Equity mutual funds go out of favour as global uncertainty weighs on investors’ minds

2 months ago 3

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What seems to be weighing on investors’ minds is the external uncertainty, outweighing strength in the local economy.

Summary

Mutual fund investors ditched equities last month amid lingering global uncertainty that is outweighing strength in the local economy. Equity fund inflows fell 19%, even as hybrid funds attracted interest. The shift signals a cautious mood as investors await the trade deal fog to clear.

With uncertainty lingering over the global economic environment, October saw the participation of investors in equity mutual funds slump. Inflows into these funds fell 19% from September to ₹24,690 crore, the third-straight month of decline, data released by the Association of Mutual Funds in India on Tuesday showed.

The fall was broad-based, though bigger in large-cap funds, which received just ₹972 crore, down from ₹2,319 crore. This is somewhat surprising considering large-cap shares in India presently are relatively inexpensive compared to small- and mid-cap shares and tend to offer better protection during times of market volatility.

What seems to be weighing on investors’ minds is the external uncertainty, outweighing strength in the local economy. Foreign investors too appear tentative about Indian shares, some short bouts of purchases notwithstanding. This could change if a trade deal with the US is struck, as US President Donald Trump has hinted.

For now, investors are treading carefully. No surprise then that hybrid funds saw inflows jump to ₹14,156 crore from ₹9,397 crore. A mix of debt and equity may indeed be the best bet to ride out volatility.

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