The mutual fund industry saw net outflows of Rs 14,553 crore in August, as investors withdrew money from equity funds as well as debt funds, data from Association of Mutual Funds of India (AMFI) showed.
Equity mutual funds saw net outflows of almost Rs 4,000 crore last month as investors pulled out funds from across categories. This was the second consecutive month of outflows from equity funds and the redemptions were also significantly higher than in July when the category had seen outflows of Rs 2,480 crore. Total assets under management (AUM) in equity funds as on August 31 stood at Rs 7.69 lakh crore.
Within equity funds, barring certain categories like focussed, sectoral or thematic funds and tax-saver ELSS funds, there were redemptions from all categories. Large cap and multi cap funds saw outflows of more than Rs 1,000 crore each. Hybrid funds, which invest in a mix of equity and debt securities, saw net outflows of Rs 4,819 crore.
“The COVID impact is there. People are redeeming a little bit where they are seeing profits. They may also be redeeming a little bit to do asset reallocation and maybe moving to debt, where in categories like corporate bond funds and others we are seeing inflows,” said N.S. Venkatesh, CEO of Association of Mutual Funds of India.
Within debt funds, even as categories like ultra-short duration funds, money market funds, corporate bond funds and dynamic bond funds saw decent inflows, overall, debt funds saw net outflows of Rs 3,907 crore last month, compared with inflows of Rs 91,391 crore in July. Total debt fund AUMs stood at Rs 12.61 lakh crore at the end of August.
The outflows in debt funds were largely driven by redemptions in overnight and liquid funds, which saw outflows of Rs 10,298 crore and Rs 15,814 crore, respectively.
“There were large amount of outflows in overnight and liquid funds, as there may have been month-end related activity; some corporates may have required cash at end of the month to meet their commitments,” said Venkatesh.
Equity markets crashed in March, but since then they have seen an upward momentum. Industry watchers believe that has prompted investors to book profits from equity funds.
“Large cap category was the worst hit during the month followed by multi-cap and value fund categories. The number of folios as well as funds mobilised during the month was marginally higher than July. But at the same time, the redemptions too shot up sharply. This indicates that more investors chose to book profit given the surge in the equity markets across segments in the recent times,” said Himanshu Srivastava, associate director-manager, research, Morningstar India.
One category that has seen inflows is other schemes, essentially comprising exchange-traded funds (ETF), gold funds, index funds and fund of funds investing in overseas markets. This category saw inflows of Rs 3,187 crore in August.
“With many actively managed funds struggling to outperform the benchmark indexes, investors have seemingly turned their focus towards ETFs,” said Srivastava.
Other ETFs saw inflows of Rs 1,721 crore, taking their total AUMs to Rs 2.06 lakh crore.
Inflows into gold ETFs have been on an uptick for the last few months, a global trend of investors turning to the safe haven asset amid the COVID19 pandemic-driven uncertainty. Gold ETFs saw inflows of Rs 908 crore, taking their total assets under management to Rs 13,503 crore.
Despite the outflows in mutual funds, investments made via systematic investment plans (SIPs) by retail investors remain fairly steady. SIP contributions in August stood at Rs 7,791 crore, compared with Rs 7,830 crore in July. Total SIP AUMs at the end of the month stood at Rs 3.36 lakh crore.