Figures released by AMFI indicate that the exponential growth in stock markets has not percolated down to the mutual fund (MF) industry as investors continue to buy income (debt) funds rather than the faster growing growth (equity) funds.

The Association of Mutual Funds of India (AMFI) has released figures highlighting the fact that investors pumped in Rs 450.7 bn in income funds over the period April-December 1999. Total inflows in the MF industry amounted to Rs 970.3 and investments in income funds accounted for 46.4% of inflows. Growth schemes at Rs 216.3 bn accounted for 22.3% of inflows. However, growth funds trailed balanced funds, which clocked higher inflows at Rs 233.3 bn to account for 24.0% of total inflows in MFs. Equity-linked tax saving schemes (ELSS) mobilised Rs 26.6 bn accounting for 2.7% of inflows.

Investments in liquid funds (Rs 23.5 bn) accounted for 2.4% of inflows, with money market funds posting just 0.5% of total inflows and gilt funds - 1.5% of inflows.

These figures underline the fact that equities continue to trail fixed income securities as an avenue of investment. This is surprising given the fact that stock markets in the recent past have witnessed increased inflows. Even the primary market has seen robust inflows at the retail level. Most of the recent IPOs have been oversubscribed several times over and this is an indication of the fact that investors are returning to the primary market after shunning it for years. This will be reflected in MF inflows.

With the healthy response that almost mutual fund (growth/open-ended) IPOs have witnessed over the past 3-4 months, there will be an increase in the contribution of growth schemes to total MF inflows. The Alliance Sector Series, IL&FS E-Commerce, Prudential-ICICI Technology Fund IPOs have posted large inflows with another dozen IPOs on the anvil. While the contribution of growth schemes towards total inflows currently stands at 24.0%, it is a matter of time before it leapfrogs somewhere near the income fund inflow figure of 46.4%.

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