Market rally fuels exits from equity schemes

Net equity outflows during January at Rs 2,700 cr, second-highest so far in FY13

Once again, equity mutual funds have fallen victim to a rising stock market. In January, when the Sensex crossed the 20,000-mark and the Nifty vaulted past the 6,000-levels, investors hurriedly booked profits and exited equity investments.

During the month, benchmark indices rose about three per cent.

At Rs 2,690 crore, January saw the second-highest net outflows from equity schemes this financial year. Both pure equity products and equity-linked saving schemes continued to see profit bookings and, therefore, higher redemptions.

January was also the eighth consecutive month of higher redemptions compared to fresh inflows. So far this financial year, May alone recorded positive flows at Rs 420 crore.

Srinivas Jain, chief marketing officer at SBI Mutual Fund, says, “There was huge profit booking. Investors redeemed a lot.”

Overall outflows in the April-January period stood at a whopping Rs 15,192 crore, surpassing the Rs 13,239-crore net outflows from equity schemes in FY11. However, in the corresponding period of FY12, net inflows of Rs 2,860 crore in equity-related schemes were recorded.

Earlier, Akshay Gupta, chief executive and managing director of Peerless Mutual Fund, had told Business Standard that as markets reached higher levels, investors were quick to book profits. “These are investors who were stuck in their equity investments for long,” he had said.

Through January, equity fund managers remained heavy net sellers. In a rising market, they sold shares worth Rs 5,200 crore, the highest in recent months. According to the head of equity at a major fund house, “A mix of factors played a role during the month. On the one hand, there was redemption pressure, which had to be met by selling holdings. On the other hand, we also booked profits on many counters.”

The proportion of mutual fund assets in the equity segment fell to 23 per cent in January, against 31 per cent at the beginning of FY13. However, in actual terms, assets under the equity segment rose 4.4 per cent — from 1.82 lakh crore to Rs 1.9 lakh crore. This was primarily due to the 25 per cent rally in the stock market during the period.

Liquid and money market funds saw net inflows of Rs 44,865 crore in January; income funds recorded Rs 17,261 crore of fresh money. Gilt funds, mopped up about Rs 1,000 crore of inflows, while gold exchange-traded funds saw fresh inflows of Rs 81 crore.

The collective fund flow across segments remained positive. Overall, January recorded net inflows of Rs 60,732, raising total inflows in FY13 (till January) to Rs 1,81,000 crore. The majority of this was accounted for by the money market and income funds.