Equity SIF Inflows Fall 21% As September Market Rout Weighs On Investor Appetite

Net inflows into equity-oriented Specialised Investment Fund (SIF) strategies fell 20.63 per cent month-on-month (m-o-m) to Rs 2,404 crore in September from Rs 3,029 crore in August, even as total inflows into the category remained above Rs 7,500 crore. The decline came as Indian equities faced pressure from global bond yields, crude oil prices, rupee depreciation and sustained foreign investor selling.

According to the latest data from the Association of Mutual Funds in India (Amfi), total net inflows into SIFs stood at Rs 7,578 crore in September, marginally lower than Rs 7,699 crore in August. Hybrid investment strategies accounted for the bulk of these flows, attracting Rs 5,174 crore, up 10.79 per cent from Rs 4,670 crore in the previous month. They contributed around 68 per cent of total net inflows.

The fall in equity-oriented SIF inflows came during a difficult month for the stock market. The Nifty 50 declined around 6 per cent in September as investors factored in higher US Treasury yields, rising crude oil prices amid uncertainty over the West Asia crisis, a weakening rupee and continued foreign portfolio investor (FPI) outflows.

How Equity-Oriented SIFs Generate Returns

SIFs, regulated by the Securities and Exchange Board of India (Sebi), offer investment strategies with greater flexibility than conventional mutual funds. They have a minimum investment requirement of Rs 10 lakh per investor across a fund manager’s SIF strategies, subject to applicable rules and exemptions.

Equity-oriented SIFs invest in stocks and can use permitted derivatives and short positions to generate returns or manage risk. Long-short strategies, for instance, buy stocks expected to rise and take short positions in those expected to fall. If both positions perform as anticipated, the strategy can benefit from the difference in their performance.

Returns depend on stock selection, market conditions and how effectively the fund manager executes the strategy. Short positions and derivatives can also magnify losses, so these funds are not necessarily less risky than conventional equity mutual funds.

SIF Assets Under Management Rise 22.8%

Despite the monthly decline in equity-oriented inflows, assets under management (AUM) across SIF strategies rose 22.8 per cent m-o-m to Rs 38,287 crore in September from Rs 31,175 crore in August.

Equity-oriented strategies accounted for Rs 11,874 crore of the September AUM, up 21.3 per cent from Rs 9,785 crore in August. Their assets have more than doubled since June, when AUM stood at Rs 5,036 crore, representing a 135.8 per cent increase over three months.

Hybrid strategies remained the largest segment, with AUM rising 23.5 per cent m-o-m to Rs 26,413 crore from Rs 21,390 crore in August. Their AUM stood at Rs 12,822 crore in June, indicating a growth of 106 per cent over three months.

One new equity-oriented strategy was launched in September and mobilised Rs 377 crore. The SIF industry has launched 33 strategies so far, but debt-oriented offerings are yet to make their debut.