Profit booking leads to investors pulling out Rs 12,917 cr from equityMFs in November

Redemptions from equity mutual funds seem to be gathering pace with investors pulling out Rs 12,917.36 crore from equity mutual funds in November, according to data from Association of Mutual Funds of India (AMFI).

Equity markets have touched record highs in recent days. The BSE Sensex has touched a new high of 45,728.85 level on Tuesday; that’s a 78 per cent surge from the low of 25,638.90 it hit on March 24. This rise in stock markets seems to have prompted investors to book profits in their equity funds.

Since July investors have now pulled out Rs 22,857 crore from equity mutual funds. Investors had redeemed Rs 2,724.95 crore in October, Rs 734.40 crore in September, Rs 3,999.62 crore in August and Rs 2,480.35 crore in July.

In November, most outflows were seen in large cap funds (Rs -3,289.18 crore), followed by multi cap funds (Rs -2,842.08 crore). Mid cap and small cap funds also saw outflows of over Rs 1,000 crore each, AMFI data showed.

Hybrid funds, which invest in a basket of equity and debt, also saw redemptions of Rs 5,249.18 crore. Even index funds saw investors pull out Rs 222.58 crore last month.

“Optically from the lows of March 2020 correction, markets have given some stupendous returns and leading to belief that markets are over-heated and therefore outflow from equity mutual funds,” said Akhil Chaturvedi, associate director and head of sales at Motilal Oswal AMC.

In comparison, debt funds saw inflows of Rs 44,983.94 crore in November, led by inflows of over Rs 27,100 crore in low duration funds and Rs 13,000 crore in short duration funds.

The inflows into debt fund schemes drove the total inflows into the mutual fund industry to Rs 27,194.15 crore, taking the net assets under management at the end of November to over Rs 30 lakh crore.

“Investors are aligning their allocation in debt schemes more towards duration schemes and corporate bond funds to maximise their debt returns and on the other hand booking profits in equity funds owing to surge in equity valuations,” admitted NS Venkatesh, chief executive of AMFI.

Chaturvedi of Motilal Oswal AMC though feels not all of the money pulled out from equity funds may have gone out completely from equities as a few investors may have also channeled some of that investment to buying shares directly.

Some part of the liquidity could have also moved out to real estate, with a renewed interest among genuine buyers wanting to own a home at lower interest rates and falling prices, he added.

Investors may also be sitting on cash to deploy it once again if there is any correction in markets, he said.