Amid rally, equity mutual fund sales hit a 10-month high

After heavy redemptions in October, retail investors accessing stock markets through this route turned buyers of equities in the run-up to the current rally

Gross sales of mutual funds’ equity schemes hit a 10-month high in November. After heavy redemptions in October, retail investors accessing stock markets through MFs turned buyers of equities in the run up to the current rally in the stock markets.

Last month, Rs 5,414 crore of equity sales took place, almost double the average monthly sales thus far this financial year. A big relief for officials in the sector, disappointed for long at the continuously low sales in the segment.

Of the sales mentioned, recent launches of closed-end equity schemes mopped Rs 847 crore; open-ended equity garnered Rs 24 crore. Axis MF, ICICI Prudential AMC and Union KBC were three entities which came with close-ended products in the month.

Gross sales of equity products in September had dipped below Rs 2,000 crore, the first time this had happened in a little over four years. This had sent tremors, particularly among marketing officers in the sector.

However, there are visible signs of improvement. Apart from gross sales, net inflows in equity schemes also moved into positive territory, to a high of Rs 699 crore since June.

In October, when the BSE exchange's benchmark Sensex hit and surpassed 21,000, the sector faced one of its highest levels of redemption, with a net outflow of Rs 3,500 crore. However, despite the indices losing a little over one per cent in November, the sector had positive inflows, amid higher sales.

 

Equity fund managers sold shares worth Rs 482 crore, a tenth of what they sold in October. "Redemptions tend to force fund managers to sell," says Navneet Munot, chief investment officer at SBI MF. According to him, there are positive signals.

However, the executive vice-president of one of the top 10 fund houses continues to remain cautious. "There is a mix of money flowing into the equity. There is some institutional as well as HNI (high net worth individuals’) money involved, too. I hope this trend sustains."

For, many times in the past, such major inflows have turned out to be aberrations. Though the number of closures of equity folios dipped to 382,000 against 547,000 in October, concern remains that several investors are still trying to exit their investments. Sectoral officials suggest investors continue with their investments and reap the benefits of an expected strong run in the stock markets.