Retail investors continued to book profits in equity mutual funds making use of every rise in share prices. Investors sold equity mutual funds for the seventh consecutive month, selling stocks worth ₹9,253 crore in January, slightly less than December’s ₹10,147 crore. With this, investors have pulled out ₹42,256 crore over the last seven months.
Investors, however, have continued with their systematic investment plans (SIPs) with collections in January at ₹8,023 crore compared to ₹8,418 crore in the previous month. Debt funds too saw outflows of ₹33,409 crore in January, primarily led by liquid funds where ₹45,000 crore moved out, which pulled the overall assets of the industry down to ₹30.50 lakh crore from ₹31.02 lakh crore in December 2020.
“HNIs are booking profits in equities and also selling the underperforming funds,” says Vineet Nanda, founder, Sift Capital. He expects this money to come back into equities in a staggered manner on corrections. Wealth managers point out that HNIs preferred to lower equity weight after the 80% rally in the Nifty 50 till January end from its March 23 lows as they believe a correction could be around the corner.
Among equity mutual funds, categories like index, thematic and international funds saw increased inflows. Thematic funds saw inflows of ₹2,586 crore primarily due to new fund offers (NFOs), index funds saw inflows of ₹454 crore while international fund of fund saw inflows of ₹755 crore as investors are looking to diversify geographically.
Many diversified equity mutual fund categories continued to see outflows. Large-cap funds saw outflows of ₹2,853 crore followed by midcaps at ₹1,206 crore and small-cap at ₹1,572 crore, while ELSS schemes saw outflows of ₹820 crore.
Hybrid mutual funds that invest in a mix of debt and equity also saw outflows of ₹3,377 crore. With returns from liquid funds and short-term rates dipping, some interest returned to arbitrage funds with such funds seeing inflows of ₹5,235 crore. Some interest is back in balanced advantage funds that consider equity valuations and invest in a mix of equity, debt and arbitrage with the category seeing inflows of ₹658 crore.
“Returns in short-term bond funds have dwindled. Investors looking for quality paper with better yields are buying corporate bonds,” said G Pradeepkumar, CEO, Union Mutual Fund. Corporate bond funds saw inflows of ₹5,428 crore, while banking and PSU debt funds saw inflows of ₹1,740 crore. Credit risk funds too saw small inflows of ₹3,66 crore as investors are looking for higher yields.