Good quarterly results, positive earnings growth prospects, and a decline in Covid cases after the second wave are driving investors back into the stock market. reported the highest monthly net inflows of 10,083 crores in May, nearly three times the previous month and the highest since February last year. Over the past three months, these funds have reported net inflows after net outflows for eight consecutive months. It also fell significantly in May compared to the previous month, according to data from the Investment Fund Association of India.
Why do investors invest in mutual funds again?
The market hit a new high due to strong quarterly earnings, the possibility of accelerated economic recovery, and the decline in Covid-19 cases after the second wave, which led to the recovery. The report stated that the net outflow in May was 445,12 crore, and investors who have been on the side-lines are slowly recovering. Due to small savings plans and declining bank deposits, many investors are turning to hybrid funds and mutual funds. On May 21, bank deposits increased by 9.7%, compared with 11% in the same period last year.
Hybrid Remains Popular with Investors
the hybrid systems category posted net inflows of Rs.6,217 crores led by arbitrage funds with Rs 4,521 crores in May. Bond investors invest in hybrid systems such as Dynamic Asset Allocation / Balanced Advantage Funds. For risk-averse investors, hybrid funds are a better option because they offer higher returns than bond funds and are not as risky as equity funds.
There are various combinations of equity and leverage investments in hybrid systems, and investors should choose funds based on investors can build a balanced portfolio and generate regular income along with long-term capital appreciation; Equity-based hybrid funds invest at least 65% of their total assets in equity-like instruments and the rest in instruments similar to debt securities A debt-oriented hybrid fund invests at least 60% of its total assets in fixed-income securities such as bonds, government bonds and the remainder in stocks.
ELSS is losing some of its appeals
In May, the Equity Linked Savings Plan (ELSS) reported that as many investors reported earnings, a net outflow of Rs290 crores was reported. Analysts said that the funds flowing into ELSS usually start to increase after September when people start tax planning, and peak in the three months before March. Many people invest in ELSS to save taxes because they receive a Rs. 150,000 deduction under income section 80C. As far as the Tax Code is concerned, investors should consider that even in ELSS, a systematic investment plan works best.