Equity schemes continue to bleed

Mutual fund industry witnesses net outflow of over Rs 3,000 crore in August

The domestic mutual fund (MF) industry has seen yet another large outflow from equity assets in August — the third month in a row in the current financial year. According to statistics released on Friday by the industry body, Association of Mutual Funds in India (Amfi), the fund market saw a net outflow of Rs 2,890 crore from equity schemes. After taking into account redemptions from equity-linked saving schemes (ELSS), the outflow amounts to Rs 3,017 crore.

It was during the same month last year that the Securities and Exchange Board of India (Sebi) had banned the imposition of any entry load on MF equity schemes. Since then, the equity segment of the fund market has been ignored by distributors, resulting in a sharp drop in sales.
 

NET OUTFLOW/INFLOW DURING AUGUST (Rs  CRORE)
Category	Net inflow/(outflow)
Income	16,561
Equity	-2,890
Balanced	398
Liquid/Money market	21,922
GILT	55
ELSS-Equity	-127
Gold ETFs	514
Other ETFs	-123
Fund of Funds Investing overseas	-125
Source: Amfi

Executives in charge of the equity division at MFs maintain that redemptions were anyway expected, as the market had reached 30-month highs. “Nervousness had come in during the latter part of the month, as there was an anticipation of a 5-10 per cent correction,” said the chief investment officer (CIO) of a large-sized fund house.

All the senior executives maintained investors who had entered the market before the collapse of 2008 were taking no chances now and were withdrawing their money after the markets regained previous valuations of their capital.

“At every high level, we expect redemptions. Though there are inflows, too, they are less than the money going out,” said the national sales head of a public sector bank’s mutual fund.

Fund managers point out that in the current month, too, chances are less that such net outflows could be stemmed, as new fund offers are no longer the once-lucrative tool that were used for attracting fresh funds. Investors are now cautious about entering equity schemes, especially when the market is already touching previous highs, they added.

Although, on the whole, the industry saw a positive net inflow of Rs 36,185 crore in the month, it were the liquid and money market asset classes which took the lead and attracted funds worth Rs 21,922 crore. They were followed by income funds which garnered a net sum of Rs 16,561 crore.

Gold ETFs (exchange traded funds) were the third-most popular asset class in August, witnessing the largest single-month net inflow so far in FY11 at Rs 514 crore.

Market experts said that, internationally, gold prices were expected to gain at least $50 more to touch $1,300 an ounce. However, other ETFs could not perform in the same manner and registered an outflow of Rs 123 crore. GILT funds also saw an inflow of Rs 55 crore in the month.