Mutual fund assets take a big hit

Highest redemption in equity schemes since entry load ban last July.

The equity segment of the domestic mutual fund market was hit hard in July, as the segment saw a record net outflow of funds even after a year of the entry load ban.

Data from the Association of Mutual Funds in India (Amfi) show equity schemes had Rs 3,400 crore of redemptions. Including the equity-linked savings schemes (ELSS), the amount redeemed in the month was even higher, at Rs 3,539 crore.

In June, too, the category saw a redemption of Rs 1,500 crore. Sector experts said, apart from distributors not selling equity products, the other factor playing an important role in such large redemptions was the stock markets regaining a 30-month high.

REVERSE FLOW Net inflow/outflow from the mutual fund industry in July
Category	Net inflow/  (outflow)
Income	475
Equity	(3,400)
Balanced	(43)
Liquid/ Money Market	34,303
GILT	40
ELSS - Equity	(139)
Gold ETFs	155
Other ETFs	375
Fund of Funds  Investing overseas	(112)
TOTAL	31,654
All figures in Rs crore Source: Association of Mutual Funds in India (Amfi)

"Several investors were stuck with their investments since 2007. These investors have been redeeming their money as the markets were going up and touching previous highs," said the chief executive officer of a top fund house.

With this, overall net outflow from the equity segment during the current financial year so far (April-July) is Rs 4,723 crore, against a net inflow of Rs 7,432 crore in the corresponding period last year.

"If markets correct, then only will investors enter. But if it remains this way and there is no incentive to distributors to sell, the equity mutual fund will always remain muted and will continue to have net outflows," said the chief executive of a mid-sized MF.

The equity segment seems to have not adjusted yet to the new regulatory norms. However, the general scenario is also not back to normalcy. Despite overall positive inflows in July, overall net inflow in the entire fund market during April-July was only Rs 35,201 crore, a sixth of last year's net inflow of Rs 2,24,082 crore into the industry.

The liquid and money market segment has seen the largest net inflow, of Rs 34,303 crore. This was followed by the income category (Rs 475 crore), and gold & other exchange traded funds, at Rs 530 crore.New schemes launched during July saw sales of Rs 4,963 crore.