Fifth month of pull out from equity MFs, redemption at Rs 12,917 cr

November outflow at record high even as overall AUM tops Rs 30 trn milestone on sharp run up in stock markets and positive flows into debt category

The monthly data released by industry body Association of Mutual Funds in India (AMFI) brought both good and bad news for the MF industry. 

Equity schemes witnessed the fifth straight month of outflows in November. The net redemption came in at Rs 12,917 crore, taking the outflow tally since July to nearly Rs 23,000 crore. On the positive side, the assets under management (AUM) for the industry touched the Rs 30-trillion mark. This was on the back of a sharp run-up in the stock markets and positive flows into the debt category to the tune of Rs 45,000 crore.

Despite outflows in the equity segment, the AUM for the segment increased to Rs 8.3 trillion in November, from Rs 7.81 trillion in the previous month -- an increase of 6.3 per cent. The overall AUM rose from Rs 28.2 trillion at the end of October to Rs 30 trillion at the end of last month. The industry had crossed the Rs 20-trillion AUM milestone in August 2017 and the Rs 10-trillion mark in May 2014.

Market players said the sharp rally in stocks prompted some investors to take money off the table, leading to an acceleration in outflows.

“The strong performance of the equity markets in November seems to have encouraged more investors to book profits and move to short-term investments. We still believe there is a significant amount of money that can come back to the market in the event of any correction,” said G Pradeepkumar, CEO, Union AMC.

In November, the benchmark Sensex and the Nifty had gained 12 per cent to scale new record highs. The rally was even sharper in the broader markets.

“While gross purchases (new investments) remained steady, the pace of redemptions picked up as the markets made new highs,” said Kaustubh Belapurkar, director-manager research, Morningstar India.

Fund managers had to step up their selling in November because of redemption pressure. During the month, they sold shares worth Rs 30,000 crore. Stocks rallied despite the selling pressure from MFs, thanks to record inflows of nearly Rs 60,000 crore from overseas investors.

Gross purchases for the month stood at Rs 14,196 crore, compared to Rs 17,514 crore in October. Inflows through the so-called systematic investment plan (SIP) route stood at Rs 7,300 crore, down from Rs 7,800 crore in the previous month.

“SIP numbers have remained robust which is a good indication of continued retail interest. It must be kept in mind that since the last three days of November were non-business days, a significant amount of SIP flows might not be reflected in the official numbers that have been released,” said Pradeepkumar.

SIPs are a recurring monthly sum invested into mutual funds by investors. Many experts recommend such staggered investment to build a healthy portfolio over the long term.