Redemption in MF equity schemes peaks in October

Market volatility has hit equity schemes of domestic mutual funds. The category has seen the highest monthly redemption so far in the current financial year in October, with net outflow crossing Rs 2,100 crore.

Equity schemes were the most hit after the liquid and money market category due to uncertain market movements in October. This is a continuation of what was seen in September, when equity schemes saw redemptions worth as much as Rs 1,756 crore.

Fund managers attributed this to the prevailing uncertainty in the markets and investors’ unwillingness to stay invested in equity schemes.

“Mutual fund investors booked profit in equity schemes. This is especially true of investors whose losses got covered during this time. They redeemed their investments to avoid erosion in net asser values (NAVs),” said the chief investment officer of a leading domestic fund house.

Investors were taking no chance as last year’s crisis had made them cautious about their investments in equity schemes, said the head of equity of a foreign mutual fund house.

“The main outflow has come from retail investors,” said a fund manager.

According to Krishnan Sitaraman, director of Crisil Fundservices, “Equity funds continued to witness outflows due to a slowdown in distributor push post the onset of the no-entry-load regime.”

In October, existing equity schemes could garner only Rs 4,261 crore, 0.41 per cent of the total sales of all mutual funds.

From April to October, the equity category managed a net inflow of Rs 3,411 crore, which was Rs 1,926 crore in the corresponding period last year. According to fund managers, equity schemes may continue to see higher outflows as a correction is expected anytime in the market.

“Markets are currently fairly valued and there are no triggers that can push them market further up,” said a fund manager.

The entire sheen in the fund market was taken away by the fixed income category, which saw whopping net inflows of Rs 1,51,271 crore in October alone, on the back of the institutional money that flowed into ultra short-term debt funds.

The mutual fund industry’s average assets under management for October stood at Rs 7,62,503 crore. Net inflows during the month were Rs 2,53,719 crore.