Equity mutual funds continued to face redemption pressures for the seventh straight month in January, as investors rushed to book profits with the Sensex touching the 50,000-mark for the first time.
Net outflow from equity mutual funds was ₹12,194.18 crore in January, slightly below January’s record ₹13,121 crore, showed data released by the Association of Mutual Funds in India (Amfi) on Tuesday. In January last year, these schemes had received a net inflow of ₹7,547.78 crore.
Domestic institutional investors (DIIs) have been steadily selling stocks from the middle of 2020. At an aggregate level, DIIs were net sellers of ₹11,970.54 crore in January, lower than the mutual fund net outflow during the month. This indicates that DIIs such as insurance companies, banks, financial institutions and pension funds were marginal net buyers in January.
“The continuation of net outflows from equity funds could be attributed to profit booking/portfolio rebalancing as markets continue to touch new highs. In fact, the net outflow number would have been higher had it not been for the new fund offers (NFO) in the sectoral or thematic fund category which collected ₹4,185 crore,” said Himanshu Srivastava, associate director and manager, research, Morningstar India.
In January, most equity fund categories saw net outflows except multi-caps, sector or thematic funds and dividend yield funds. Amfi data showed that during January, 16 multi-cap funds were re-categorized as flexi-cap funds. Large-cap category was one of the most affected in January with a net outflow of ₹2,853.43 crore, against ₹3876.39 crore outflows in previous month.
According to D.P. Singh, chief business officer, SBI Mutual Fund, the outflow trend in equity schemes is likely to reverse from hereon as retail and institutional investors will rebalance their portfolios as the fiscal year draws to a close.
“It is typically seen that retail inflow into equity schemes increase towards the end of the fiscal year as investors adjust their portfolio, taking the benefit of tax-saving schemes. We expect inflows into equity schemes to increase here on,” he said.
Contribution from systematic investment plans (SIP) fell marginally to ₹8,023.39 crore in January from Rs8,418.11 crore in December. Total redemptions in equity schemes stood at Rs33,383.65 crore in January, from ₹36,220.28 crore in December, which was the highest since March 2018.
N.S. Venkatesh, chief executive, Amfi said, “January saw measured maturity-driven redemptions led by smart, goal-based investing and the desire to book profits with equity indices reaching all-time high.”
“On the debt side, owing to regulatory measures to ease liquidity, and also the stance to hold on to the policy rates, some of the debt categories like corporate bond fund, banking and PSU fund, short duration funds have seen positive flows. Even the credit risk funds are now moving into positive flows, given that the risk-return dynamics is working in favour of retail investors.”