Gold ETFs log Rs 61-cr outflow in July as investors pick equity, debt funds

After seven straight months of net inflows, gold exchange traded funds witnessed a pullout of over Rs 61 crore in July as investors diverted their money to equity and debt funds that generated attractive returns.

Despite the negative flows in the category, the number of folios went up to 19.13 lakh in July from 18.32 lakh in the preceding month, data with Association of Mutual Funds in India (Amfi) showed.

Barring February 2020, November 2020 and July 2021, investments into ETFs that track the yellow metal have been witnessing a steady uptick since August 2019.

The gold ETFs category, which has seen continuous inflows since December 2020, witnessed an outflow of Rs 61.5 crore in July this year.This was starkly different as compared to the inflows of Rs 360 crore in June and Rs 288 crore in May.

During the first six months of the year, investors put in Rs 3,107 crore in such instruments.

Prior to the latest outflow, gold ETFs had witnessed an outflow of Rs 141 crore in November 2020 and Rs 195 crore in February 2020.

Priti Rathi Gupta, Founder, LXME attributed the latest outflow from gold ETFs to two factors -- gold prices at an all-time-high for a while, creating anticipation amongst investor for a price plunge and investors tending to divert their investments into these instruments due to attractive returns fetched by equity and debt funds.

Equity mutual funds clocked a staggering net investment of Rs 22,583 crore and debt funds attracted a net sum of Rs 73,964 crore last month.

"The positive uptrend across the equity markets and the positive investor sentiment towards equity led to an increased inflow into the segment. While equity funds witnessed the highest level of inflows on a historical basis, gold stagnated as investors preferred equity over gold," Kavitha Krishnan, Senior Analyst Manager Research, Morningstar India, said.

Despite outflow, the assets under management (AUM) of gold ETFs rose to Rs 16,750 crore at the end of July from Rs 16,225 crore at June-end.

Gold has been increasingly acknowledged as asset class that helps diversify an investor's portfolio, Krishnan said.

Gold ETFs are basically exchange-traded funds that invest in gold. They are traded on the stock market and make direct investments in gold.