July another big outflow month for equity mutual funds

Prior to this, months of May and January witnessed heavy outflows

Equity mutual funds, after seeing positive inflows in June, are back in the red. This category of funds, including equity-linked saving schemes, witnessed a net outflow of Rs 1,827 crore in July, the third highest so far this year, after January and May.

At a time when equity markets continued to remain volatile, amid liquidity tightening measures by the Reserve Bank of India and signals of tapering of monetary expansion from the US Federal Reserve, investors chose to exit whenever the benchmark indices hovered near their historic peaks, resulting in more of redemption than purchases.

In June, equity schemes managed to get a fresh net inflow of Rs 872 crore but sector officials stayed away from commenting on whether it was a sustainable turn of the tide. July’s heavy redemptions brought back the apprehension that investors were still eschewing investment in equities.

With the latest high money outflows, the current financial year is proving to be worse than in the previous corresponding period. Taking into account July's redemptions, overall net outflow from equity funds for April-July was Rs 4,583 crore, more than three times what was seen in the year-ago period at Rs 1,430 crore.

During the month, fund managers sold shares worth Rs 2,100 crore, a 21-times increase over June. As on July 31, equity assets were Rs 162,609 crore against Rs 170,109 crore in the same period of 2012, a drop of 4.4 per cent.

Equity apart, almost all categories of funds, barring gilts, saw money flowing out in July. Liquid and money market schemes were burdened the most, as banks were quick to redeem amid the central bank's liquidity tightening. The segment witnessed a net outflow of Rs 45,296 crore.

Gold exchange-traded-funds continued to feel the heat and outflows were Rs 107 crore. It was a similar case with balanced funds.

With across the board redemptions, the assets under management of the funds sector dropped below Rs 8 lakh crore for the first time since April. It registered a month-on-month decline of 6.35 per cent in July to Rs 760,833 crore.