Redemptions hit equity MFs again as Sensex hovers around 20K

Fund managers sell shares worth Rs 1,300 crore in first half of September

Equity mutual fund schemes are once again at the receiving end as key stock indices hover close to their all time peaks.

After seeing net inflows in equity funds amid a volatile market in August, mutual fund houses are once again seeing a rise in redemption requests from equity schemes.

Pressure is mounting on fund managers to sell shares to meet rising redemption requests. As per the data from the Securities and Exchange Board of India (Sebi), in the first half of this month, equity fund managers sold stocks worth Rs 1,291 crore.

This is opposite to what was witnessed last month when fund managers' net investment in shares were positive after over a year at Rs 1,607 crore.

Sector officials feel this is not unusual at a time when key indices are hovering around their all time peaks.

"This has now become largely a trend. Whenever Sensex inches closer to the psychological level of 20,000, investors rush to redeem their investments," says chief investment officer of one of the largest fund houses.

Agrees equity head of a foreign fund house. "So far this year, there have been not less than five times that benchmark indices oscillated between 5,300 and 6,000 as far as CNX Nifty is concerned. Investors have a realisation that India's markets are more or less traders' market and higher levels are being seldom sustained," he said.

This is quite unfortunate for the industry which had been hoping August to be a trend setter as redemptions had taken a back seat and less than a lakh equity folios were closed - first time since December, 2011.

Since March, 2009 India's fund industry has lost close to a whopping 10 million equity accounts.