Iran war drags India MF equity flows to annual low; gold ETFs see record outflows

Business Recorder

Iran war drags India MF equity flows to annual low; gold ETFs see record outflows

India’s equity mutual fund inflows fell to their lowest in a year in May as Iran war-driven market volatility drove away investors while gold ETFs saw record outflows after a call to curb bullion purchases promoted profit taking at all-time high prices. Flows into equity mutual fund dived 40% month-on-month to 229.08 billion rupees ($2.4 billion) in May, data from the Association of Mutual Funds in India showed on Wednesday. Inflows into small-cap, mid-cap and large-cap funds fell 28.2%, 33.2% and 36.9%, respectively. “The lower inflows are due to extreme volatility in the markets as crude hovers around $100 a barrel, which has prompted near-term caution among investors,” said Venkat Chalasani, CEO of AMFI. India, the world’s third-biggest oil importer, is highly vulnerable to energy price shocks that could stoke domestic inflation and widen its trade deficit. India’s gold tariff hike fuels smuggling revival, squeezes banks and refiners Gold ETF hit Gold exchange traded funds posted record outflows of 7.25 billion rupees in May. In May, India raised import tariffs on gold and silver to 15% from 6%, as part of efforts to curb overseas purchases of the metals and ease pressure on the country’s foreign exchange reserves. Indian Prime Minister Narendra Modi last month urged people to avoid gold purchases for a year to help protect foreign exchange reserves. India meets almost all of its gold consumption through imports. Investors have likely taken a “practical view” on gold and booked profits at record highs amid government’s request to avoid gold buying and some asset management companies halting inflows into ETFs, said Feroze Azeez, joint CEO of Anand Rathi Wealth. “After a sharp rally, future returns may not look as attractive as they did over the past year,” Azeez said. India’s small-cap, mid-cap mutual fund inflows hit record highs in April Steady SIPs Inflows through systematic investment plans, the preferred route for retail investors, remained resilient, helping cushion the market against overseas outflows. SIP flows stood at $3.25 billion in May, little changed from the previous month. India’s benchmark Nifty 50 index lost 1.9% in May, and is down 10.6% so far this year.

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