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Friday, June 05, 2020

Post-Templeton fiasco, credit risk funds see outflows of Rs 19,238 crore

The total corpus of credit risk fund category declined sharply to Rs 35,222 crore from around Rs 55,000 crore in March.

By: ENS Economic Bureau | Mumbai | Published: May 9, 2020 1:56:08 am
Franklin Templeton Mutual Fund, SEBI, Franklin Templeton, mutual funds, business news, indian express Investors shifted from credit schemes after Templeton decided to close six schemes blaming poor liquidity in the wake of the COVID-19 breakout. (Photo: Noah Berger/Bloomberg News)

Credit risk schemes and several other debt funds witnessed outflows during April 2020 as the Franklin Templeton fiasco prompted worried investors to pull out funds from risky schemes. Credit risk schemes of various fund houses witnessed outflows of Rs 19,238 crore in April after Templeton abruptly decided to wind down six credit schemes.

The total corpus of credit risk fund category declined sharply to Rs 35,222 crore from around Rs 55,000 crore in March. Ultra short duration funds, low duration funds and medium duration funds also saw outflows of up to a total of over Rs 16,000 crore. However, liquid funds registered inflows of Rs 68,848 crore.

Explained

Investors turn cautious, may avoid risky schemes

Investors have turned cautious after Franklin Templeton’s decision to abruptly close schemes with assets of Rs 28,000 crore. They are likely to ignore mutual fund schemes which have high concentrations of high risk, unlisted, opaque and structured debt securities — with low credit ratings — of lesser known companies. Investors want fund houses to rebalance their portfolios as per the directions of market regulator Sebi.

Investors shifted from credit schemes after Templeton decided to close six schemes blaming poor liquidity in the wake of the COVID-19 breakout.

With stock markets witnessing high volatility, equity schemes witnessed lower net inflows of Rs 6,212.96 crore during April as against inflows of Rs 11,723 crore in March. The total assets under management (AUM) of the mutual fund (MF) industry also declined to Rs 23.93 lakh crore as of April, as compared to Rs 24.70 lakh crore in March 2020.

According to figures released by the Association of Mutual Funds of India (Amfi), SIP contribution for April stood at Rs 8,376.11 crore as compared to 8,641.20 crore in March. SIP assets were at Rs 2,75,982 crore as of April as against Rs 2,39,886 crore in March.

NS Venkatesh, Chief Executive, Amfi, said, “It is heartening to note that despite subdued economic scenario, retail investors are seen to be continuing with their goal-based investment discipline, displaying mature investment conduct, as seen from month-on-month rise in retail AUMs, as also marked rise in the number of SIP accounts.”

“In the prevailing scenario of low inflation, expected softer interest rate regime, MF industry would see heightened interest in fixed income schemes, especially low duration schemes,” he further said.

Total retail assets were at Rs 9,89,032 crore as of April as against Rs 8,80,810 crore in the preceding month, a rise of 12.28 per cent.

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