Hybrid mutual funds get Rs 72k-cr inflows in 7 mths
Taxation tweak for debt funds triggers arbitrage advantage for investors
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Hybrid funds appeal more to investors with a moderate or low-risk profile
Catching Investors’ Fancy
• It recorded net withdrawal of Rs12,372 cr in Mar
• Hybrid schemes got inflow of Rs9,907 cr in Oct
• The category attracted Rs62,174 cr in Apr-Sept
New Delhi: Hybrid mutual fund (MF) schemes have been gaining popularity among investors with the category attracting over Rs72,000 crore in the past seven months, following a change in taxation for debt funds and huge inflow experienced in the arbitrage category.
Hybrid funds are mutual fund schemes that typically invest in a combination of equity and debt securities and sometimes in other asset categories such as gold. The category has been attracting regular inflows since April after a change in taxation for debt funds that kicked off in the same month. Before that, the segment saw a net withdrawal of Rs12,372 crore in March.
According to the latest data with the Association of Mutual Funds in India (Amfi), hybrid schemes witnessed an inflow of Rs9,907 crore in October. The category had attracted Rs62,174 crore in the April-September period. With this, total inflow has reached Rs72,081 crore in the first seven months of the current financial year.
Of Rs72,081 crore, a massive amount of Rs48,978 crore inflow was seen in the arbitrage category, data showed. Hybrid funds appeal more to investors with a moderate or low-risk profile. These funds are good investment options as they reduce the volatility associated when participating in equity markets while simultaneously providing stability in the fixed-income market.
Market analysts believe that investors are looking to invest a portion of their fixed income exposure through hybrid funds after the change in taxation for debt funds. Under the new rules that kicked in from April 1, debt mutual funds held for more than three years will no longer enjoy indexation benefits.
Indexation takes into account inflation during the holding period of a mutual fund unit and consequently increases the purchase price of the asset and this reduces the tax. The inflow has pushed the Assets Under Management (AUM) of hybrid schemes by 19 per cent to Rs5.88 lakh crore in October-end from Rs4.94 lakh crore in April. Within the hybrid schemes, the largest assets belong to the dynamic asset-allocation/balanced advantage category, with assets totalling Rs2.12 lakh crore. This was followed by the balanced hybrid fund/aggressive hybrid category with assets of Rs1.72 lakh crore.
