Equity schemes posted net outflows of about Rs 4,000 in August, the highest in the last decade, led by withdrawals in large and multi-cap schemes. Investors booked profits or redeemed their investments to meet liquidity needs in a month when benchmark indices rose 2.7 per cent.
Seven of the 10 equity oriented categories saw outflows totalling Rs 4,402 crore. Redemptions grew 11.6 per cent to Rs 18,558 crore over the previous month. Inflows via systematic investment plans (SIP) held steady despite slipping for the fifth straight month. Contributions totalled Rs 7,792 crore in August, half a per cent lower than the Rs 7,831 crore garnered in the previous month.
“It is clear that retail investors are impacted due to the current economic environment brought on by Covid-19. Investors tend to reduce risk on their portfolios by selling equity MFs in such an environment. While the long term opportunity of mutual funds remains promising, the pain in the short term is not likely going to go away soon," said Jean-Christophe Gougeon, director - Investment Solutions, Sharekhan by BNP Paribas.
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Market players, however, do not see the outflows as alarming and expect things to stabilise in a quarter or two, likening the current situation to that seen in 2009 when markets recovered following the global financial crisis.
“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 booking profit given the surge in the equity markets across segments in the recent times,” said Himanshu Srivastava, associate director - manager research, Morningstar India.
The industry saw a net addition of 465,000 new folios, including 343,000 SIP folios, indicating sustained retail interest in mutual funds, said experts. NS Venkatesh, chief executive, Association of Mutual Funds in India (Amfi), said, “Retail investors continue to exhibit mature investment behavior despite a volatile and challenging economic environment, as seen from record high retail AUMs, rise in SIP AUMs, SIP folios, and significantly higher quantum of flows towards multi asset allocation schemes during the month.”
According to G Pradeepkumar, CEO, Union AMC, some investors may have taken a tactical asset allocation call by moving from equity to low duration or ultra-short term funds with the objective of re-entering equity funds at lower levels in the event of a correction in the equity market.
Ultra-short term, low duration and money market funds together saw inflows of over Rs 18,000 crore, even as the debt category as a whole saw outflows of Rs 3,907 crore, led by redemptions in liquid and overnight funds of over Rs 26,000 crore.
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“Given the current interest rate scenario, investors are largely focusing on fixed income categories having relatively shorter duration profile. In addition, funds with pristine credit quality, especially from categories such as money market, corporate bond and banking and PSU, continue to gain traction from investors highlighting their preference for safety in this segment,” said Srivastava.
He added that investors continued to shy away from riskier bets in the credit space, which is why the credit risk funds saw outflows of Rs 554 crore.
Total AUM for the MF industry stood at Rs 27.8 trillion at the end of August, up slightly from Rs 27.3 trillion at the end of the previous month.
Equity schemes post net outflows of Rs 4,000 cr in Aug, highest in 10 yrs
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