June 21, 2018

High net worth individuals (HNIs) are gradually shifting away from the equity market, show the latest data from Association of Mutual Funds of India (AMFI). According to market trackers, fixed maturity instruments and real estate are back on the radar of these investors.

Monthly investment through the systematic investment plans (SIPs), which is largely driven by retail investors, has remained constant at around $1 billion per month in the past three months. But, the share of HNI and discretionary inflows in the total domestic equities flow dropped to 39 percent in the past two months compared with 55 percent in the past one year.

The SIP book in March 2018 was at Rs 7,119 crore, while the total inflow was limited to Rs 2,954 crore. It implies that there were outflows of Rs 4,165 crore from the lump sum investment. SIP flow accounted for 87 percent of the total domestic mutual fund flows of Rs 24,122 crore between March and May, against 42 percent contributed by the SIPs in the previous fiscal.

Fixed maturity plans (FMPs) are becoming more lucrative giving interest rates between 8.4 percent and 8.75 percent. In May 2018, FMP funds collected nearly Rs 12,000 crore.

FMPs are closed-ended debt mutual fund schemes with a fixed maturity period. These funds try to invest in instruments whose duration is similar to the maturity. This eliminates the risk of interest rate fluctuations.

Another reason for the HNI shift is the rising attractiveness of real estate due to lower relative valuation. "Several HNIs believe that they should lower their exposure to equities due to high valuation as well as higher allocation in the proportion of the total assets. As a result, they have started looking at real estate," said senior marketing head of a leading mutual fund.

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