July outflows from equity MFs hits third highest this year

The current financial year, so far, is proving to be worse than last year

Equity mutual funds, after seeing positive inflows in June, are back in the red. This category of funds, including the equity-linked saving schemes (ELSS), witnessed net outflows 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 (RBI) and signals of tapering off from the Federal Reserve, investors chose to exit whenever the benchmark indices hovered near their historic peaks resulting into more 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 whether it was a sustainable turn of the tide. With heavy redemptions in July brings back the apprehension that investors are still eschewing investments in equities.

With the latest high money outflows from equity, the current financial year is proving to be worse than what was the case in the previous corresponding period. Taking into account July's redemptions, overall net outflows from equity funds for the period April-July stands at Rs 4,583 crore - more than three times of 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 whopping 21 times increase when compared with the immediate previous month. As on 31 July, equity assets stood at Rs 1,62,609 crore against Rs 1,70,109 crore - a drop of 4.4%.

It was not only equity which was hit during July. Almost all categories of funds, barring Gilt funds, saw money flowing out. Liquid and money market schemes was burdened the most as banks were quick to redeem amid central bank's liquidity tightening. The segment witnessed a net outflow of Rs 45,296 crore.

Gold exchange-traded-funds (ETFs) continued to feel the heat and outflows stood at Rs 107 crore. Similar was the case with the balance funds.

With across the board redemptions, the assets under management (AUM) of fund industry dropped below the mark of 8 lakh crore - first time in last four months. It registered a month-on-month decline of 6.35% in July to Rs 7,60,833 crore - lowest since April this year. It was in April, that the sector had surpassed the Rs 8 lakh crore mark and reached as high as to 8.68 lakh crore in May.