Gold ETFs continue to see outflow in April on profit booking

Investors remained bearish on gold exchange-traded funds (ETFs) in April, as they pulled out Rs 69 crore from this instrument mainly on account of profit booking.

However, Quantum AMC Senior Fund Manager (Alternative Investments) Chirag Mehta believes that investors may come back on the buying side if the positive returns on gold sustain over next few months.

The trading in the Gold ETF segment has been tepid in last three financial years. The funds witnessed an outflow of Rs 903 crore, Rs 1,475 crore and Rs 2,293 crore in 2015-16, 2014-15 and 2013-14, respectively.

The pace of outflow, however, slowed down in the 2015-16 fiscal ended March 31, as against the preceding two years on account of sluggish equity market.

"The continuation of outflows from Gold ETFs despite a sharp rally in gold prices may likely be on account of investors booking profits," Mehta said.

"Retail investors usually want to see some sustainability of positive returns, may be over a year or so, to convince them to buy. This is typical behaviour we have seen with retail investors and was evident in equity markets where we saw good buying interest in 2014-15 after witnessing a big rally in Indian equities in 2013-14," he added.

According to the latest data available with Association of Mutual Funds in India, Gold ETFs witnessed a net outflow of Rs 69 crore in April.

However, the asset base of gold funds rose to Rs 6,480 crore at the end of April from Rs 6,346 crore in March-end.

The mutual fund sector has 14 gold-based schemes, which have been in the market since 2006-07.

The demand for gold ETFs has steadily fallen in the past few years. These products have seen outflow as gold prices are correcting and equities have given good returns to investors.

Retail investors have put in more money into equity and debt mutual funds in April.

Equity and equity-linked saving schemes saw an infusion of over Rs 4,438 crore and money market segment attracted nearly Rs 1.34 lakh crore.

Overall, mutual fund schemes have witnessed an inflow of Rs 1.7 lakh crore during the period under review.