At a time equity markets have scaled record highs, Indian mutual fund investors seem to have taken the profit booking route, to encash the gains that they have made from their investments.
According to data released by the Association of Mutual Funds of India (AMFI), investors pulled out Rs 9,253 crore in January. This was the seventh consecutive month of outflows from equity mutual funds, although the selling pressure seems to have eased a bit. In December, investors had pulled out Rs 10,147 crore from equity funds.
The net assets under management of equity funds at the end of January, 2021, stood at Rs 8.91 lakh crore, the data showed. Including other categories like debt funds, hybrid funds and exchange traded funds, net AUM of the industry stood at Rs 30.50 lakh crore at the end of January.
Equity mutual funds were hit hard as stocks crashed in March 2020, due to the COVID-19 pandemic. But there has been a relentless rally since, with the BSE Sensex hitting a record high of 51,835.86 on Tuesday. This has also driven equity mutual fund returns, prompting investors who had stayed invested in the losses last March to redeem their money now.
Except for sectoral/thematic funds, which saw inflows of Rs 2,586 crore, all other equity fund categories, be it large cap or the newly created flexicaps and even mid and small caps saw outflows.
“Markets are touching new highs based on the good budget, because of which people are seeing an opportunity to encash their positive returns, which they are seeing after a lot of time and they are taking profits off the table,” said N.S. Venkatesh, chief executive of AMFI.
Debt mutual funds also saw outflows in January, primarily led by the withdrawals from liquid funds. Investors pulled out Rs 33,409 crore from debt funds in January; liquid funds alone saw outflows of over Rs 45,300 crore. However, corporate bond funds saw inflows of over Rs 5,400 crore and there were inflows in other categories like banking and PSU funds and short duration funds.
Even as investors pulled out money from equity funds, index funds, which are passive funds, these saw inflows of Rs 454 crore. Exchange traded funds (ETFs), including gold ETFs also saw investors pouring in money. Funds investing in overseas markets too saw inflows.
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Hybrid funds also saw people investing over Rs 2,100 crore, primarily driven by inflows in arbitrage funds and dynamic asset allocation funds, while balanced hybrid funds saw investors pullout.
While on an overall basis, the net outflows from equity funds was lower than the previous month, they still remain on the higher side in absolute quantum, noted Himanshu Srivastava, associate director—manager research at Morningstar India.
“While the gross purchase (new investments) was lower in January than the previous month, gross redemptions also came down at Rs 33,383.65 crore from Rs 36,220.28 crore in December. This suggests that while investors are yet to come back and invest substantially in the funds, there are signs of moderation with respect to redemption as well,” said Srivastava.
Venkatesh says there could be another couple of months before markets stabilise.
