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Follow UsLump sum gross inflows into the equity segment, excluding new fund offers (NFOs), stood at ₹17,900 in October, the lowest since November 2020, according to the latest report by Motilal Oswal Financial Services Ltd.
The slowdown has been on account of large high net worth individuals (HNIs) waiting for a better entry point as the equity market is close to a new high, weakness in flows from lower-end customers in rural areas, and reduced NFO activity by large fund houses in the equity segment, the report said.
As per Motilal Oswal Financial Services (MOFSL), redemptions in the equity segment have been steady.
MOFSL interacted with a few large mutual fund distributors and institutional sales representatives to gauge customer behavior in the current environment.
As per the financial services company, over the past couple of months, a few major trends have emerged: resurgence of NFOs in 2QFY23 after a hiatus, steady trends in overall AUM, sustained high outflows from the debt segment, and new highs in monthly SIP inflows.
The report also highlighted that HNIs have shown a rising propensity towards investing in the passive segment, driven by the formalization of their investment process as the next generation takes over.
HNIs also prefer to invest in alternate assets (such alternative investment funds and portfolio management services) as they offered relatively better returns in the past couple of years.
This, despite the high cost that HNIs have to bear, when compared with mutual funds.
The report said that large corporates are the key drivers of flows into the debt segment.
Currently, they are anticipating further hikes, at least until March 2023. Institutions are also considering investments in fixed deposits and non-convertible debentures (NCDs) versus debt funds to avoid a notable mark-to-market impact.
With another 50 bp hike, or if the yield on the 10-year G-Sec touches 8%, flows may shift to long duration debt assets, translating into better yields.