MFs selling spree continues; withdraw Rs 30,760-cr from equities in Nov

Continuing their selling spree for the sixth straight month, mutual funds pulled out Rs 30,760crore from equities in November on profit booking and experts believe the outflow trend will continue unless there is correction in markets.

With this, net withdrawal by mutual funds (MFs) has reached to over Rs 28,000 crore in the first 11 months of the ongoing year (January-November), data available with the Securities and Exchange Board of India (Sebi) showed.

The markets, despite the withdrawals from mutual funds in the last few months, have continued to rise as flows from FPIs have been robust.

Foreign Portfolio Investors (FPIs) have put in over Rs 1.08 lakh crore in the Indian equity markets during January-November period of 2020.

"With markets touching new highs and Nifty PE (private equity) valuations crossing 36 times, there is profit booking happening. This is visible from the increased 'outflow' number compared with September -October," said Vidya Bala, co-founder of PrimeInvestor.in.

The gross inflows have also not picked up much as the impact of COVID-19 on individual investor's income is yet to normalise, she added.

Making similar statement, Omkeshwar Singh, head RankMF at Samco Securities, said there has been a very sharp rally in November coupled with markets at an all-time high, which prompted many investors to book profits as they are not very comfortable at this level and the same can be visible in the latest data.

According to the data, MFs pulled out Rs 30,760 crore from equities in November. This has taken the outflow to over Rs 68,400 crore since June.

MFs withdrew Rs 14,492 crore in October, Rs 4,134 crore in September, Rs 9,213 crore in August, Rs 9,195 crore in July and Rs 612 crore in June.

However, they invested over Rs 40,200 crore in the first five months of the year (January-May). Of this, Rs 30,285 crore was invested in March.

Divam Sharma, co-founder at Green Portfolio, said the rise in markets and higher valuations have triggered the recent withdrawals from equities.

Going ahead, Bala said, "we expect equity outflows to continue to remain tepid until there is some correction in the equity market".

Kaustubh Belapurkar, Director Manager Research at Morningstar India said net inflows into equity schemes from investors, which could be triggered by a market correction or a longer term visibility of pick-up in economic growth, wouldresult in net positive investments by MFs in stocks.

Green Portfolio's Sharma said decent correction would induce investors to increase equity allocations going forward.

"Robust Q2 performance by companies and a better expected Q3, rising GST collections, and positive liquidity from global investors shall arrest any significant withdrawals from equities in the near term," he added.