While mutual funds have been the flavor for many years now, they are now losing their attractiveness given the fall in returns in them and even there has been reported a decline in interest in small savings instruments despite them fetching better returns than the conventional fixed deposits at banks. So, where are the investors interested to park their funds:
1. Liquid Fds:
In the backdrop of Covid 19 led financial crunch, most people are now looking at keeping their money in highly liquid FDs and in fact are avoiding small savings scheme which though come with a lock-in in some form or the other.
"The incremental small savings deposits has significantly slowed down as a percentage of incremental ASCB or All Scheduled Commercial Banks deposits in current fiscal with people keeping money more in liquid bank deposits rather than locking them in financial savings," SBI economists said in a report.
"In FY19, the incremental small savings deposits was 24% of incremental ASCB deposits. Interestingly, this trend has somehow slowed down in current fiscal with people keeping in money more in liquid bank deposits rather than locking them in financial saving (the share is now 14%)," the report said.
Now there is seen an interest to invest in stock market as against the indirect route of investment of mutual funds. This is partly influenced by the ease in trading as well as higher returns from the category. This is eminent from the surge in average daily trading cash volume from Rs 20,000 crore in FY19 to around Rs 32,000 crore this year and the average age of the investors have also declined as per B Gopkumar, MD and CEO of Axis Securities.
For the July month, the inflow in ETF shall be over Rs. 1000 crore and the momentum is likely to continue. "ETF flows are a mix of institutional, HNI and retail, and the trend of their folio and AUM accretion is likely to continue in the near term," according to Lakshmi Iyer, Chief Investment Officer (Debt) and Head Products, Kotak Mahindra Asset Management Company.
This will be the first monthly outflows since March 2016, according to AMFI data.
Further what is filling the gap in equity fund outflows is ETFs, index funds, fund of fund of overseas scheme and gold ETFs.
And inflow from retirement body EPFO in ETFs and index funds is seen to be positive for the markets as such flows are not tactical.