March saw equity MF outflow after 2 years

Investors pullout Rs 1,370 cr in March from equity schemes

Domestic mutual funds (MFs) have seen investors taking money out from their equity schemes for the first time in nearly two years.

After months of robust inflow, equity MFs saw net redemption in March of Rs 1,370 crore, showed data from the Association of Mutual Funds in India. The outflow came even as March saw a sharp 10 per cent rebound in benchmark indices, after correction of nearly 12 per cent in the first two months. Gross redemptions were a massive Rs 14,700 crore in March and fund managers liquidated holdings to honour investors' redemption requests.

In March, fund managers sold shares worth Rs 10,200 crore. The net outflow figure was relatively subdued due to gross inflow of around Rs 13,000 crore. The high sales were from a new set of investors and sticky flows from systematic investment plans and from investments in equity linked savings schemes (ELSS), a tax saving instrument.

Milind Barve, managing director, HDFC MF, says: "It is too early to call it a trend, as a very short period is taken into consideration. The past two years have seen significant improvement in asset allocation, with a tilt towards equity investment. Investors will continue to come to equity as other asset classes like real estate, gold and bank deposits do not look promising."

According to him, the redemptions could be on the back of finalising of tax planning by investors and, therefore, too much need not be read into the numbers. It is, in fact, visible when one looks at the positive flows in ELSS, of Rs 1,836 crore.

Kaustubh Belapurkar, director (fund research) at Morningstar India, agrees with Barve. "Last-minute tax planning by investors could be the culprit behind the overall net outflow in the equity segment. With the crackdown in the market in the first half of the quarter ended March, investors were concerned and some of them might have partially redeemed. But, I believe, the outflow numbers are not alarming and investors will come back, as the market is showing some signs of improvement," explains Belapurkar.

Overall, the MF sector saw outflow of Rs 73,113 crore. A majority of it came from the liquid and money market segment, of Rs 58,605 crore. This is a typical quarter-end phenomenon, when large institutions and companies tend to take out, only to put money back in funds by the start of the next quarter.

Gold funds continued to see outflows, at Rs 105 crore. Gilt funds, which invest in government securities, witnessed outflow of Rs 1,073 crore. As of end-March, assets under management of the fund sector were Rs 12.32 lakh crore. Of this, the equity category (including ELSS) manages Rs 3.86 lakh crore.