More investor faith in mutual funds this year, outflows halve

Rs 5,526 cr pulled out against Rs 12,931 cr in FY13

Outflows from mutual fund equity schemes might accelerate in the near term as unit holders, who have pulled out about Rs 15 crore a day so far this financial year, are likely to use the record high market levels to book profits.

So far this financial year, equity schemes have seen Rs 5,526 crore in outflows, according to data from the Association of Mutual Funds in India. This is the second  year in which the money pulled out of equity MFs by investors is more than what was put in. In 2012-13, net outflows stood at Rs 12,931 crore. In 2011-12, there were net inflows of Rs 264 crore.

Vijai Mantri, managing director and chief executive, Pramerica Mutual Fund, said retail investors had been hitting the exit button this month, the last one of the financial year. “We had some retail participation after the state elections, towards the end of last year. However, outflows are likely to have continued in March, as some people might have been looking to book profits, with the markets hitting new highs,” he said.

Through the past five years, investors redeemed Rs 31,003 crore from equity MFs. November 2013, which saw  assembly elections, was the beginning of a four-month streak of inflows.

Navneet Munot, chief investment officer, SBI Mutual Fund, said, “This year, the outflows have been driven by old investors looking to book profits….One will have to look at the final numbers but it could be marginally negative, to the tune of a few hundred crore,” he said.

On Monday, the benchmark BSE Sensex had closed at a record high of 22,055.48; on Tuesday, it ended nearly flat, down 0.27 points.

Munot said, “The year ahead will likely be positive, with elections being the key trigger. There could be a pick-up in flows but a reflection of that sentiment among retail investors tends to come with a lag.”

Mantri said, “The first couple of months are likely to be tough. But this could be a watershed year for equities, and inflows could pick up.”